As Filed with the Securities and Exchange Commission on April 29, 2002
File No. 333-59769
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 4 TO FORM S-1
ON FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LINCOLN BENEFIT LIFE COMPANY
(Exact name of Registrant as Specified in its Charter)
Nebraska 6300 470221457
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
2940 South 84th St., Lincoln, Nebraska 68506
1-800-525-9287
(Address of registrant's principal executive offices)
WILLIAM F. EMMONS
LINCOLN BENEFIT LIFE COMPANY
2940 South 84th St.
LINCOLN, NEBRASKA 68506
1-800-525-9287
(Name of agent for service)
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Copy to:
JOAN E. BOROS, ESQ.
CHRISTOPHER S. PETITO, ESQ.
Jorden Burt LLP
1025 Thomas Jefferson Street N.W.
Suite 400 East
Washington, D. C. 20007-0805
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If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / X /
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
Calculation of Registration Fee
- ------------------------------- ------------------- --------------------- ------------------------ ----------------
Proposed Maximum Proposed Maximum Amount to
Title of Each Class of Amount to be Offering Price Per Aggregate Offering Registration
Securities to be Registered Registered Unit Price Fee
Market Value Adjusted
Interest under Individual
Flexible Premium
Deferred Variable Annuity
Contracts. . . . . . . . . . * * * *
... . . .
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* These Contracts are not issued in predetermined amounts or units. A maximum
aggregate offering price of $25,000,000 was previously registered. No
additional amount of securities is being registered by this post effective
amendment to the registration statement.
CROSS REFERENCE SHEET
(Pursuant to Regulation S-K, Item 501(b)
- ----------------------------------------- -----------------------------------------
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus. . . . . .. . . . . . .Facing Page and Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus. . . . . . . . . . . . . . . . . . . . . . . . .Table of Contents
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges. . . . . . . . . . . . . . . . . Questions and Answers about
Your Contract; Not Applicable as to Ratio of Earnings to
Fixed Charges
4. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . .Allocation of Purchase
Payments; The Investment and Fixed Account Options; Lincoln
Benefit Life Company; Investments by Lincoln Benefit
5. Determination of Offering Price. . . . . . . . . . . . . . . . . . Not Applicable
6. Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
7. Selling Security Holders. . . . . . . . . . . . . . . . . . . . . .Not Applicable
8. Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . . .Distribution of Contracts
9. Description of Securities to be Registered. . . . . . . . . . . . .Questions and Answers about
your Contract; Description of the Contracts; Annuity
Benefits; Other Contract Benefits; Contract Charges
10. Interests of Named Experts and Counsel . . . . . . . . . . . . . .Experts; Legal Matters
11. Information with respect to Registrant. . . . . . . . . . . . . . Taxes; Description of Lincoln
Benefit Life Company and the Separate Account; Legal
Proceedings; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liability. . . . . . . . . Part II, Item 17.
CONSULTANT II VARIABLE ANNUITY PROSPECTUS
FLEXIBLE PREMIUM
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY
Lincoln Benefit Life Company
IN CONNECTION WITH
LINCOLN BENEFIT LIFE VARIABLE ANNUITY ACCOUNT
STREET ADDRESS: 2940 SOUTH 84TH STREET, LINCOLN, NE 68506
MAILING ADDRESS: P. O. BOX 82532, LINCOLN, NE 68501-2532
Telephone Number: 1-800-865-5237
The Contract is a deferred annuity contract designed to aid you in long-term
financial planning. You may purchase it on either a tax qualified or non-tax
qualified basis.
Because this is a flexible premium annuity contract, you may pay
multiple premiums. We allocate your premium to the investment options under the
Contract and our Fixed Account in the proportions that you choose. The Contract
currently offers fifty-three investment options, each of which is a subaccount
of the Lincoln Benefit Life Variable Annuity Account ("Separate Account"). Each
Subaccount invests exclusively in shares of one of the following Portfolios:
The Alger American Fund:
Growth Portfolio
Income and Growth Portfolio
Leveraged AllCap Portfolio
MidCap Growth Portfolio
Small Capitalization Portfolio
Federated Insurance Series:
Fund for U.S. Government Securities II
High Income Bond Fund II
Utility Fund II
Fidelity Variable Insurance Products Fund:
Asset Manager Portfolio - Initial Class
Contrafund Portfolio - Initial Class
Equity-Income Portfolio - Initial Class
Growth Portfolio - Initial Class
Index 500 Portfolio - Initial Class
Money Market Portfolio - Initial Class
Overseas Portfolio - Initial Class
Janus Aspen Series:
Aggressive Growth Portfolio: Institutional Shares
Balanced Portfolio: Institutional Shares
Flexible Income Portfolio: Institutional Shares
Global Value Portfolio: Service Shares
Growth Portfolio: Institutional Shares
Worldwide Growth Portfolio: Institutional Shares
LSA Variable Series Trust:
Balanced Fund
Basic Value Fund
Diversified Mid-Cap Fund
Emerging Growth Equity Fund
Mid Cap Value Fund
Value Equity Fund
MFS Variable Insurance Trust:
Emerging Growth Series - Initial Class
Investors Trust Series - Initial Class
New Discovery Series - Initial Class
Research Series - Initial Class
Total Return Series - Initial Class
OCC Accumulation Trust:
Science and Technology Portfolio
Small Cap Portfolio
Oppenheimer Variable Account Funds:
Main Street Small Cap Fund/VA - Service Shares
PIMCO Variable Insurance Trust:
Foreign Bond Portfolio
Total Return Portfolio
Putnam Variable Trust:
International Growth and Income Fund - Class 1B
Scudder Variable Series I:
Balanced Portfolio
Bond Portfolio
Global Discovery Portfolio
Growth and Income Portfolio
International Portfolio
STI Classic Variable Trust:
Capital Appreciation
International Equity
Value Income Stock
Strong Opportunity Fund II, Inc.:
Opportunity Fund II
Strong Variable Insurance Funds, Inc.:
MidCap Growth Fund II
T. Rowe Price Equity Series, Inc.:
Equity Income Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
T. Rowe Price International Series, Inc.:
International Stock Portfolio
Van Kampen Life Investment Trust:
Growth and Income Portfolio, Class II
Some of the portfolios described in this prospectus may not be
available in your Contract. We may make available other investment options in
the future.
You may not purchase a Contract if either you or the Annuitant are 90
years old or older before we receive your application.
Your Contract Value will vary daily as a function of the investment
performance of the Subaccounts to which you have allocated Purchase Payments and
any interest credited to the Fixed Account. We do not guarantee any minimum
Contract Value for amounts allocated to the Subaccounts. Benefits provided by
this Contract, when based on the Fixed Account, are subject to a Market Value
Adjustment, which may result in an upwards or downwards adjustment in withdrawal
benefits, death benefits, settlement values, and transfers to the Subaccounts.
In certain states the contract may be offered as a group contract with
individual ownership represented by Certificates. The discussion of Contracts in
this prospectus applies equally to Certificates under group contracts, unless
the context specifies otherwise.
This prospectus sets forth the information you ought to know about the
Contract. You should read it before investing and keep it for future reference.
(continued on next page)
The Securities and Exchange Commission has not Approved or Disapproved
these Securities nor has it Passed on the Accuracy or the Adequacy of this
Prospectus. Any Representation to the Contrary is a Criminal Offense.
The Date of this Prospectus is May 1, 2002.
We have filed a Statement of Additional Information with the Securities
and Exchange Commission ("SEC"). The current Statement of Additional Information
is dated May 1, 2002. The information in the Statement of Additional
Information, dated May 1, 2002, is incorporated by reference in this prospectus.
You can obtain a free copy by writing us or calling us at the telephone number
given above. The Table of Contents of the Statement of Additional Information
appears on page [ ]of this prospectus.
At least once each year we will send you an annual statement. The
annual statement details values and specific information for your Contract. It
does not contain our financial statements. Our financial statements are set
forth in the Statement of Additional Information. Lincoln Benefit will file
annual and quarterly reports and other information with the SEC. You may read
and copy any reports, statements or other information we file at the SEC's
public reference room in Washington, D.C. You can obtain copies of these
documents by writing to the SEC and paying a duplicating fee. Please call the
SEC at 1-800-SEC-0330 for further information as to the operation of the public
reference room. Our SEC filings are also available to the public on the SEC
Internet site (http://www.sec.gov).
This Prospectus is Valid only if Accompanied or Preceded by Current
Prospectuses for the Portfolios Listed Above. If any of these Prospectuses is
Missing or Outdated, Please Contact Us and We Will Send You the Prospectus You
Need.
Please Read This Prospectus Carefully and Retain It for Your Future Reference.
TABLE OF CONTENTS
DEFINITIONS...................................................................
FEE TABLES....................................................................
EXAMPLES......................................................................
EXPLANATION OF FEE TABLES AND EXAMPLES........................................
QUESTIONS AND ANSWERS ABOUT YOUR CONTRACT.....................................
CONDENSED FINANCIAL INFORMATION...............................................
DESCRIPTION OF THE CONTRACTS..................................................
Summary.......................................................................
Contract Owner................................................................
Annuitant.....................................................................
Modification of the Contract..................................................
Assignment....................................................................
Free Look Period..............................................................
PURCHASES AND CONTRACT VALUE..................................................
Minimum Purchase Payment......................................................
Automatic Payment Plan........................................................
Allocation of Purchase Payments...............................................
Contract Value................................................................
Separate Account Accumulation Unit Value......................................
Transfer During Accumulation Period...........................................
Transfers Authorized by Telephone.............................................
Excessive Trading Limits
Automatic Dollar Cost Averaging Program.......................................
Portfolio Rebalancing.........................................................
THE INVESTMENT AND FIXED ACCOUNT OPTIONS......................................
Separate Account Investments..................................................
The Portfolios................................................................
Voting Rights.................................................................
Additions, Deletions, and Substitutions of Securities.........................
The Fixed Account.............................................................
General.......................................................................
Guaranteed Maturity Fixed Account Option......................................
Market Value Adjustment.......................................................
Dollar Cost Averaging Fixed Account Option....................................
ANNUITY BENEFITS..............................................................
Annuity Date..................................................................
Annuity Options...............................................................
Other Options.................................................................
Annuity Payments: General.....................................................
Variable Annuity Payments.....................................................
Fixed Annuity Payments........................................................
Transfers During Annuity Period...............................................
Death Benefit During Annuity Period...........................................
Certain Employee Benefit Plans................................................
OTHER CONTRACT BENEFITS.......................................................
Death Benefit.................................................................
Beneficiary...................................................................
Contract Loans for 401(a), 401(k), and 403(b) Contracts.......................
Withdrawals (Redemptions).....................................................
Systematic Withdrawal Program.................................................
ERISA Plans...................................................................
Minimum Contract Value........................................................
CONTRACT CHARGES..............................................................
Mortality and Expense Risk Charge.............................................
Administrative Charges........................................................
Contract Maintenance Charge.................................................
Administrative Expense Charge...............................................
Transfer Fee................................................................
Premium Taxes.................................................................
Deduction for Separate Account Income Taxes...................................
Other Expenses................................................................
FEDERAL TAX MATTERS...........................................................
Taxation of Lincoln Benefit Life Company
Taxation of Annuities in General
Tax Qualified Contracts
DESCRIPTION OF LINCOLN BENEFIT LIFE COMPANY AND THE SEPARATE ACCOUNT..........
Lincoln Benefit Life Company..................................................
Separate Account..............................................................
State Regulation of Lincoln Benefit...........................................
ADMINISTRATION................................................................
MARKET TIMING AND ASSET ALLOCATION SERVICES...................................
DISTRIBUTION OF CONTRACTS.....................................................
LEGAL PROCEEDINGS.............................................................
LEGAL MATTERS.................................................................
REGISTRATION STATEMENT........................................................
APPENDIX A ACCUMULATION UNIT VALUES...........................................
APPENDIX B PORTFOLIOS AND PERFORMANCE DATA....................................
APPENDIX C ILLUSTRATION OF A MARKET VALUE ADJUSTMENT..........................
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
DEFINITIONS
Please refer to this list for the meaning of the following terms:
Accumulation Period - The period, beginning on the Issue Date, during which
Contract Value builds up under your Contract.
Accumulation Unit - A unit of measurement which we use to calculate Contract
Value.
Annuitant - The natural person on whose life the annuity benefits under a
Contract are based.
Annuitization - The process to begin annuity payments under the Contract.
Annuitized Value - The Contract Value adjusted by any applicable Market Value
Adjustment and less any applicable taxes.
Annuity Date - The date on which annuity payments are scheduled to begin.
Annuity Period - The period during which annuity payments are paid. The Annuity
Period begins on the Annuity Date.
Annuity Unit - A unit of measurement which we use to calculate the amount of
Variable Annuity payments.
Beneficiary(ies) - The person(s) designated to receive any death benefits under
the Contract.
Company ("We," "Us," "Our," "Lincoln Benefit") - Lincoln Benefit Life Company.
Contract Anniversary - Each anniversary of the Issue Date.
Contract Owner ("You") - The person(s) having the privileges of ownership
defined in the Contract. If your Contract is issued as part of a retirement
plan, your ownership privileges may be modified by the plan.
Contract Value - The sum of the values of your investment in the Subaccounts of
the Separate Account and the Fixed Account.
Contract Year - Each twelve-month period beginning on the Issue Date and each
Contract Anniversary.
Contribution Year - Each twelve-month period beginning on the date a Purchase
Payment is allocated to a Subaccount, or each anniversary of that date.
Fixed Account - The portion of the Contract Value allocated to our general
account.
Fixed Annuity - A series of annuity payments that are fixed in amount.
Guarantee Periods - A period of years for which we have guaranteed a specific
effective annual interest rate on an amount allocated to the Fixed Account.
Issue Date - The date when the Contract becomes effective.
Latest Annuity Date - The latest date by which you must begin annuity payments
under the Contract.
Loan Account - An account established for amounts transferred from the
Subaccounts or the Fixed Account as security for outstanding Contract loans.
Market Value Adjustment - An amount added to or subtracted from certain
transactions involving your interest in the Fixed Account, to reflect the impact
of changing interest rates.
Net Investment Factor - The factor used to determine the value of an
Accumulation Unit and Annuity Unit in any Valuation Period. We determine the Net
Investment Factor separately for each Subaccount.
Non-Qualified Plan - A retirement plan which does not receive special tax
treatment under Sections 401, 403(b), 408, 408A or 457 of the Tax Code.
Portfolio(s) - The underlying mutual funds in which the Subaccounts invest. Each
Portfolio is an investment company registered with the SEC or a separate
investment series of a registered investment company.
Purchase Payments - Amounts paid to us as premium for the Contract by you or on
your behalf.
Qualified Plan - A retirement plan which receives special tax treatment under
Sections 401, 403(b), 408 or 408A of the Tax Code or a deferred compensation
plan for a state and local government or another tax exempt organization under
Section 457 of the Tax Code.
Separate Account - The Lincoln Benefit Life Variable Annuity Account, which is a
segregated investment account of the Company.
Subaccount - A subdivision of the Separate Account, which invests wholly in
shares of one of the Portfolios.
Surrender Value - The amount paid upon complete surrender of the Contract, equal
to the Contract Value, less any applicable premium taxes and the contract
maintenance charge and increased or decreased by any Market Value Adjustment.
Tax Code - The Internal Revenue Code of 1986, as amended.
Treasury Rate - The U.S. Treasury Note Constant Maturity Yield for the preceding
week as reported in Federal Reserve Bulletin Release H.15.
Valuation Date - Each day the New York Stock Exchange is open for business.
Valuation Period - The period of time over which we determine the change in the
value of the Subaccounts in order to price Accumulation Units and Annuity Units.
Each Valuation Period begins at the close of normal trading on the New York
Stock Exchange ("NYSE") currently 4:00 p.m. Eastern time on each Valuation Date
and ends at the close of the NYSE on the next Valuation Date.
Variable Annuity - A series of annuity payments that vary in amount based on
changes in the value of the Subaccounts to which your Contract Value has been
allocated.
FEE TABLES
Contract Owner Transaction Expenses
Sales Charge - None.
ANNUAL CONTRACT MAINTENANCE CHARGE................................................................. $35.00
TRANSFER FEE (Applies solely to the second and subsequent transfers within a calendar month. We are $10.00
currently waiving the transfer fee)..............................................................
SEPARATE ACCOUNT EXPENSES (AS A PERCENTAGE OF DAILY NET ASSET VALUE DEDUCTED FROM EACH OF THE
SUBACCOUNTS OF THE SEPARATE ACCOUNT)
Mortality and Expense Risk Charge......................................................... 1.30%
Administrative Expense Charge............................................................. 0.10%
Separate Account Annual Expenses.......................................................... 1.40%
PORTFOLIO ANNUAL EXPENSES
(After contractual reductions and reimbursements as indicated in the footnotes)
(as a percentage of Portfolio average daily net assets)1
Total Portfolio
Management Rule 12b-1 Other Annual Expenses
Portfolio Fees Fees Expenses
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Alger American Growth Portfolio 0.75% N/A 0.06% 0.81%
Alger American Income & Growth Portfolio 0.625% N/A 0.095% 0.72%
Alger American Leveraged AllCap Portfolio 0.85% N/A 0.07% 0.92%
Alger American MidCap Growth Portfolio 0.80% N/A 0.08% 0.88%
Alger American Small Capitalization Portfolio 0.85% N/A 0.07% 0.92%
Federated Fund for U.S. Government Securities II (2) 0.85% N/A 0.14% 0.99%
Federated High Income Bond Fund II (2) 0.85% N/A 0.16% 1.01%
Federated Utility Fund II (2) 1.00% N/A 0.17% 1.17%
Fidelity VIP Asset Manager Portfolio - Initial Class (3) 0.53% N/A 0.11% 0.64%
Fidelity VIP Contrafund Portfolio - Initial Class (3) 0.58% N/A 0.10% 0.68%
Fidelity VIP Equity-Income Portfolio - Initial Class (3) 0.48% N/A 0.10% 0.58%
Fidelity VIP Growth Portfolio - Initial Class (3) 0.58% N/A 0.10% 0.68%
Fidelity VIP Index 500 Portfolio - Initial Class (4) 0.24% N/A 0.11% 0.35%
Fidelity VIP Money Market Portfolio - Initial Class 0.18% N/A 0.10% 0.28%
Fidelity VIP Overseas Portfolio - Initial Class (3) 0.73% N/A 0.19% 0.92%
Janus Aspen Series Aggressive Growth Portfolio: Institutional 0.65% N/A 0.02% 0.67%
Shares
Janus Aspen Series Balanced Portfolio: Institutional Shares 0.65% N/A 0.01% 0.66%
Janus Aspen Series Flexible Income Portfolio: Institutional Shares 0.64% N/A 0.03% 0.67%
Janus Aspen Series Global Value Portfolio: Service Shares (5) 0.00% 0.25% 1.25% 1.50%
Janus Aspen Series Growth Portfolio: Institutional Shares 0.65% N/A 0.01% 0.66%
Janus Aspen Series Worldwide Growth Portfolio: Institutional 0.65% N/A 0.04% 0.69%
Shares
LSA Balanced Fund (6) 0.80% N/A 0.30% 1.10%
LSA Basic Value Fund (7) 0.90% N/A 0.30% 1.20%
LSA Diversified Mid-Cap Fund (7) 0.90% N/A 0.30% 1.20%
LSA Emerging Growth Equity Fund (6) 1.05% N/A 0.30% 1.35%
LSA Mid Cap Value Fund (7) 0.85% N/A 0.30% 1.15%
LSA Value Equity Fund (6) 0.80% N/A 0.30% 1.10%
MFS Emerging Growth Series - Initial Class (8) 0.75% N/A 0.12% 0.87%
MFS Investors Trust Series - Initial Class (8) 0.75% N/A 0.15% 0.90%
MFS New Discovery Series - Initial Class (8, 9) 0.90% N/A 0.16% 1.06%
MFS Research Series - Initial Class (8) 0.75% N/A 0.15% 0.90%
MFS Total Return Series - Initial Class (8) 0.75% N/A 0.14% 0.89%
OCC Science and Technology Portfolio (10 ,11) 0.00% N/A 1.05% 1.05%
OCC Small Cap Portfolio 0.80% N/A 0.10% 0.90%
Oppenheimer Main Street Small Cap Fund/VA - Service Class 0.75% 0.15% 0.29% 1.19%
PIMCO Foreign Bond Portfolio (12) 0.25% N/A 0.66% 0.91%
PIMCO Total Return Portfolio (12, 13) 0.25% N/A 0.41% 0.66%
Putnam VT International Growth and Income Fund - Class IB (14) 0.80% 0.25% 0.18% 1.23%
Scudder SVSI Balanced Portfolio 0.48% N/A 0.08% 0.56%
Scudder SVSI Bond Portfolio 0.48% N/A 0.09% 0.57%
Scudder SVSI Global Discovery Portfolio (15) 0.98% N/A 0.24% 1.22%
Scudder SVSI Growth and Income Portfolio 0.48% N/A 0.08% 0.56%
Scudder SVSI International Portfolio 0.84% N/A 0.16% 1.00%
STI Capital Appreciation Fund (16) 1.15% N/A 0.29% 1.44%
STI International Equity Fund (16) 1.25% N/A 1.07% 2.32%
STI Value Income Stock Fund (16) 0.80% N/A 0.32% 1.12%
Strong Mid Cap Growth Fund II (17, 18) 0.92% N/A 0.47% 1.39%
Strong Opportunity Fund II (17, 18) 1.00% N/A 0.38% 1.38%
T. Rowe Price Equity Income Portfolio 0.85% N/A 0.00% 0.85%
T. Rowe Price International Stock Portfolio 1.05% N/A 0.00% 1.05%
T. Rowe Price Mid-Cap Growth Portfolio 0.85% N/A 0.00% 0.85%
T. Rowe Price New America Growth Portfolio 0.85% N/A 0.00% 0.85%
Van Kampen LIT Growth and Income Portfolio, Class II 0.60% 0.25% 0.15% 1.00%
1. Figures shown in the Table are for the year ended December 31, 2001 (except
as otherwise noted).
2. Although not contractually obligated to do so, the shareholder services
provider waived its fee during the fiscal year ended December 31, 2001.
Additionally, the shareholder services provider has no present intention of
charging the shareholder services fee during the year ending December 31,
2002. "Total Portfolio Annual Expenses" listed in the table above reflect
gross ratios prior to any voluntary waivers/reimbursements of expenses. Had
this fee reduction been taken into account, "Total Portfolio Annual
Expenses" would have been lower and would equal 0.74% for Fund for U.S.
Government Securities II, 0.76% for High Income Bond Fund II and 0.92% for
Utility Fund II.
3. Actual "Total Portfolio Annual Expenses" were lower because a portion of
the brokerage commissions that the Portfolios paid was used to reduce the
Portfolios' expenses. In addition, through arrangements with the
Portfolios' custodian, credits realized as a result of uninvested cash
balances are used to reduce a portion of the Portfolios' custodian
expenses. These offsets may be discontinued at any time. Had these offsets
been taken into account, "Total Portfolio Annual Expenses" would have been
0.63% for Asset Manager Portfolio, 0.64% for Contrafund Portfolio, 0.57%
for Equity-Income Portfolio, 0.65% for Growth Portfolio, and 0.87% for
Overseas Portfolio.
4. The Portfolio's manager has voluntarily agreed to reimburse expenses to the
extent that "Total Portfolio Annual Expenses" (excluding interest, taxes,
certain securities lending costs, brokerage commissions and extraordinary
expenses) exceed 0.28%. This arrangement can be discontinued by the
Portfolio manager at any time. Including this reimbursement, the
"Management Fees", "Other Expenses" and "Total Portfolio Annual Expenses"
in 2001 were 0.24%, 0.04% and 0.28%, respectively. "Total Portfolio Annual
Expenses" are shown without the effect of any expense offset arrangement.
5. Portfolio expenses include expense waivers. Waivers are first applied
against "Management Fees" and then against "Other Expenses", and will
continue until at least the next annual renewal of the advisory agreements
(June 2003). Had these waivers not been in effect, "Management Fees", "Rule
12b-1 Fees", " Other Expenses" and "Total Portfolio Annual Expenses" would
have been 0.65%, 0.25%, 2.72% and 3.62%, respectively.
6. Under an expense limitation agreement ("Agreement"), the manager has agreed
to reduce its fees or reimburse the Portfolio for expenses incurred above
certain limits. Currently, this limit is set so that the Portfolio will not
incur expenses (including interest, taxes, brokerage commissions and
extraordinary expenses) that exceed the amount of its management fee plus
0.30% of its average daily net assets. Without these fee reductions or
expense reimbursements, "Other Expenses" and "Total Portfolio Annual
Expenses" for the period ending December 31, 2001 were 2.15% and 2.95% for
LSA Balanced Fund, 3.05% and 4.10% for Emerging Growth Equity Fund and
2.10% and 2.90% for LSA Value Equity Fund, respectively. These reductions
and reimbursements will remain in effect until at least April 30, 2003.
Under certain circumstances, the Agreement provides that, commencing May 1,
2002 and continuing for three years thereafter, the manager may recoup a
certain amount of its fee reductions and reimbursements. The total amount
of reimbursement, if any, paid in any year to the manager may not, however,
cause "Total Portfolio Annual Expenses" to exceed the percentages listed in
the table.
7. Figures shown are based on estimates for the current fiscal year. Under an
expense limitation agreement ("Agreement"), the manager has agreed to
reduce its fees or reimburse the Portfolio for expenses incurred above
certain limits. Currently, this limit is set so that the Portfolio will not
incur expenses (including interest, taxes, brokerage commissions and
extraordinary expenses) that exceed the amount of its management fee plus
0.30% of its average daily net assets. Without these fee reductions or
expense reimbursements, "Other Expenses" and "Total Portfolio Annual
Expenses" for 2002 are expected to be 6.50% and 7.40% for LSA Basic Value
Fund, 6.29% and 7.19% for LSA Diversified Mid-Cap Fund and 6.33% and 7.18%
for LSA Mid Cap Value Fund, respectively. These reductions and
reimbursements will remain in effect until at least April 30, 2003. Under
certain circumstances, the Agreement provides that, commencing June 1, 2002
and continuing for three years thereafter, the manager may recoup a certain
amount of its fee reductions and reimbursements. The total amount of
reimbursement, if any, paid in any year to the manager may not, however,
cause "Total Portfolio Annual Expenses" to exceed the percentages listed in
the table.
8. Each Portfolio has an expense offset arrangement which reduces the
Portfolios' custodian fee based upon the amount of cash maintained by the
Portfolio with its custodian and dividend disbursing agent. Each Portfolio
may enter into other such arrangements and directed brokerage arrangements,
which would also have the effect of reducing the Portfolios' expenses.
"Other Expenses" do not take these expense reductions into account, and are
therefore higher than the actual expenses of the Portfolios. Had these fee
reductions been taken into account, "Total Portfolio Annual Expenses" would
have been lower and would equal 0.86% for Emerging Growth Series, 0.89% for
Investors Trust Series, 1.05% for New Discovery Series, 0.89% for Research
Series and 0.88% for Total Return Series.
9. MFS has contractually agreed, subject to reimbursement, to bear expenses
for the Portfolio such that "Other Expenses" (after taking into account the
expense offset arrangement described in note 8 above), do not exceed 0.15%
of the average daily net assets of the Portfolio during the current fiscal
year. Without this reimbursement arrangement and the expense offset
arrangement described in footnote 8, "Total Portfolio Annual Expenses"
would have been 1.09%. These contractual fee arrangements will continue at
least until May 1, 2003.
10. The Portfolio had expenses offset by earnings credits from the custodian
bank. Had the expense offsets been taken into account "Total Portfolio
Annual Expenses" would have been 1.00% for Science and Technology
Portfolio.
11. The adviser has agreed to waive a portion of its fee such that "Total
Portfolio Annual Expenses" (after taking into consideration the expense
offset described in note 12 above) do not exceed 1.00% annually. Without
this waiver, "Management Fees", "Other Expenses" and "Total Portfolio
Annual Expenses" would have been 0.80%, 2.42% and 3.22%, respectively. This
fee waiver will remain in effect until April 30, 2003.
12. "Total Portfolio Annual Expenses" listed in the table above are gross
ratios prior to any voluntary waivers or reimbursements of expenses. PIMCO
has agreed to reduce "Total Portfolio Annual Expenses" to the extent they
would exceed, due to the payment of organizational expenses and trustees'
fees, 0.90% of average daily net assets for Foreign Bond Portfolio and
0.65% for of average daily net assets for Total Return Portfolio. With
these reductions, "Total Portfolio Annual Expenses" for the fiscal year
ended December 31, 2001 would have been 0.90% for Foreign Bond Portfolio
and 0.65% for Total Return Portfolio. Under the Expense Limitation
Agreement, PIMCO may recoup these waivers and reimbursements in future
periods, not exceeding three years, provided "Total Portfolio Annual
Expenses", including such recoupment, do not exceed the annual expense
limit.
13. Effective May 1, 2002 the PIMCO Total Return Bond Portfolio changed its
name to the PIMCO Total Return Portfolio.
14. Restated to reflect an increase in Rule 12b-1 Fees effective April 30,
2001. Actual Rule 12b-1 Fees during the most recent fiscal year were 0.22%.
See the Funds' prospectus for more information about Rule 12b-1 fees
payable under the Funds' distribution plan.
15. Pursuant to their respective agreements with Scudder Variable Series I, the
investment manager, the underwriter and the accounting agent have agreed,
for the one year period commencing on May 1, 2002, to limit their
respective fees and to reimburse "Other Expenses" to the extent necessary
to limit the "Total Portfolio Annual Expenses" to 1.25%.
16. "Total Portfolio Annual Expenses" listed in the table above are gross
ratios prior to any voluntary waivers/reimbursements of expenses. The
Investment Adviser, has voluntarily agreed to reduce or limit certain other
expenses to the extent "Total Portfolio Annual Expenses" exceed 1.15% for
Capital Appreciation Fund, 1.60% for International Equity Fund and 0.95%
for Value Income Stock Fund. This arrangement can be discontinued by the
Adviser at any time. With these limitations taken into consideration,
"Management Fees", "Rule 12b-1 Fees", "Other Expenses" and "Total Portfolio
Annual Expenses" were as follows:
Management Fees Rule 12b-1 Total Portfolio
Portfolio Fees Other Expenses Annual Expenses
- ------------------------------------------------------ ---------------- --------------- ------------------- -------------------
STI Capital Appreciation Fund 0.86% N/A 0.29% 1.15%
STI International Equity Fund 0.53% N/A 1.07% 1.60%
STI Value Income Stock Fund 0.63% N/A 0.32% 0.95%
17. "Total Portfolio Annual Expenses" listed in the table above reflect gross
ratios prior to any voluntary waivers or absorptions of expenses. As
compensation for advisory services, the Portfolio pays Strong a monthly
management fee at an annual rate of 0.75% of the Portfolios' average daily
net assets. Strong has voluntarily agreed to waive the management fee
and/or absorb the Portfolios' "Other Expenses" so that "Total Portfolio
Annual Expenses" do not exceed 1.20% for Mid Cap Growth Fund II and 1.10%
for Opportunity Fund II. With these waivers taken into consideration "Total
Portfolio Annual Expenses" for the year ended December 31, 2001 were 1.19%
for Mid Cap Growth Fund II and 1.10% for Opportunity Fund II. Strong has no
current intention to, but may in the future, discontinue or modify any fee
waivers or expense absorptions after any appropriate notice to the
Portfolios' shareholders.
18. The Portfolio has signed a new administration agreement, under which Strong
Capital Management, Inc., will provide or make provision for administrative
services to the Portfolio, which were previously performed under the
advisory agreement. The old investment advisory agreement covered both
management and administrative services. Effective July 31, 2001, these
services were unbundled and administrative services were covered under a
separate administration agreement. As a result, the management fee was
reduced by 0.25% and a new administration fee was added in the amount of
0.30%.
EXAMPLES
AT THE END OF THE APPLICABLE TIME PERIOD, YOU WOULD PAY THE FOLLOWING EXPENSES
ON A $1,000 INVESTMENT, ASSUMING 5% ANNUAL RETURN ON ASSETS.
Sub-Account 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Alger American Growth $23 $71 $122 $262
Alger American Income & Growth $22 $69 $118 $253
Alger American Leveraged AllCap $24 $75 $128 $273
Alger American MidCap Growth $24 $74 $126 $269
Alger American Small Capitalization $24 $75 $128 $273
Federated Fund for U.S. Government Securities II $25 $77 $131 $280
Federated High Income Bond Fund II $25 $77 $132 $282
Federated Utility Fund II $27 $82 $140 $298
Fidelity VIP Asset Manager $21 $66 $114 $245
Fidelity VIP Contrafund $22 $68 $116 $249
Fidelity VIP Equity-Income $21 $64 $111 $238
Fidelity VIP Growth $22 $68 $116 $249
Fidelity VIP Index 500 $19 $57 $99 $214
Fidelity VIP Money Market $18 $55 $95 $207
Fidelity VIP Overseas $24 $75 $128 $273
Janus Aspen Series Aggressive Growth $22 $67 $115 $248
Janus Aspen Series Balanced $22 $67 $115 $247
Janus Aspen Series Flexible Income $22 $67 $115 $248
Janus Aspen Series Global Value $30 $92 $157 $330
Janus Aspen Series Growth $22 $67 $115 $247
Janus Aspen Series Worldwide Growth $22 $68 $116 $250
LSA Balanced $26 $80 $137 $291
LSA Basic Value $27 $83 $142 $301
LSA Diversified Mid-Cap $27 $83 $142 $301
LSA Emerging Growth Equity $29 $88 $149 $316
LSA Mid Cap Value $29 $88 $149 $316
LSA Value Equity $26 $80 $137 $291
MFS Emerging Growth $24 $73 $125 $268
MFS Investors Trust $24 $74 $127 $271
MFS New Discovery $26 $79 $135 $287
MFS Research $24 $74 $127 $271
MFS Total Return $24 $74 $126 $270
OCC Science and Technology $26 $79 $134 $286
OCC Small Cap $24 $74 $127 $271
Oppenheimer Main Street Small Cap $27 $83 $141 $300
PIMCO Foreign Bond $24 $74 $127 $272
PIMCO Total Return $22 $67 $115 $247
Putnam VT International Growth and Income $27 $84 $143 $304
Scudder SVSI Balanced $21 $64 $110 $236
Scudder SVSI Bond $21 $64 $110 $237
Scudder SVSI Global Discovery $27 $84 $143 $303
Scudder SVSI Growth and Income $21 $64 $110 $236
Scudder SVSI International $25 $77 $132 $281
STI Capital Appreciation $29 $90 $154 $324
STI International Equity $38 $116 $196 $405
STI Value Income Stock $26 $81 $138 $293
Strong Mid Cap Growth II $29 $89 $151 $320
Strong Opportunity II $29 $89 $151 $319
T. Rowe Price Equity Income $24 $73 $124 $266
T. Rowe Price International Stock $26 $79 $134 $286
T. Rowe Price Mid-Cap Growth $24 $73 $124 $266
T. Rowe Price New America Growth $24 $73 $124 $266
Van Kampen LIT Growth and Income $25 $77 $132 $281
EXPLANATION OF FEE TABLES AND EXAMPLES
1. We have included the table and examples shown above to assist you in
understanding the costs and expenses that you will bear directly or
indirectly by investing in the Separate Account. The table reflects
expenses of the Separate Account as well as the Portfolios. For
additional information, you should read "Contract Charges," which
begins on page [ ]; you should also read the sections relating to
expenses of the Portfolios in their prospectuses. The examples do not
include any taxes or tax penalties you may be required to pay if you
surrender your Contract. The examples assume that the fee waivers and
expense reimbursements discussed above will continue for the periods
shown.
2. The examples assume that you did not make any transfers. We are
currently waiving the transfer fee, but in the future, we may decide to
charge $10 for the second and each subsequent transfer within a
calendar month. Premium taxes are not reflected. Currently, we deduct
premium taxes (which range from 0% to 3.5%) either from premium
received or from Contract Value upon full surrender, death or
annuitization.
3. To reflect the contract maintenance charge in the examples, we
estimated an equivalent percentage charge, which we calculated by
dividing the total amount of contract maintenance charges expected to
be collected during a year by the total estimated average net assets of
the Subaccounts and the Fixed Account attributable to the Contracts.
4. Your expenses will be the same regardless of whether you surrender,
annuitize, or continue to hold your Contract at the end of the
applicable time period, because we do not charge a withdrawal charge on
surrenders or annuitizations of this Contract.
NEITHER THE FEE TABLES NOR THE EXAMPLES SHOULD BE CONSIDERED
REPRESENTATIONS OF PAST OR FUTURE EXPENSES. YOUR ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN. SIMILARLY, THE ANNUAL RATE OF RETURN OF 5% ASSUMED IN
THE EXAMPLE IS NOT AN ESTIMATE OR GUARANTEE OF FUTURE INVESTMENT PERFORMANCE.
QUESTIONS AND ANSWERS
ABOUT YOUR CONTRACT
The following are answers to some of the questions you may have about some of
the more important features of the Contract. The Contract is more fully
described in the rest of the Prospectus. Please read the Prospectus carefully.
1. What is the Contract?
The Contract is a flexible premium deferred variable annuity contract. It is
designed for tax-deferred retirement investing. The Contract is available for
non-qualified or qualified retirement plans. The Contract, like all deferred
annuity contracts, has two phases: the Accumulation Period and the Annuity
Period. During the Accumulation Period, earnings accumulate on a tax-deferred
basis and are taxed as income when you make a withdrawal. The Annuity Period
begins when you begin receiving payments under one of the annuity payment
options described in the answer to Question 2. The amount of money accumulated
under your Contract during the Accumulation Period will be used to determine the
amount of your annuity payments during the Annuity Period.
Your premiums are invested in one or more of the Subaccounts of the
Separate Account or allocated to the Fixed Account, as you instruct us. You may
allocate your Contract Value to up to twenty-one options under the Contract,
counting each Subaccount and the Fixed Account as one option. We will treat all
of your Contract Value allocated to the Fixed Account as one option for purposes
of this limit, even if you have chosen more than one Guarantee Period. The value
of your Contract will depend on the investment performance of the Subaccounts
and the amount of interest we credit to the Fixed Account.
Each Subaccount will invest in a single investment portfolio (a
"Portfolio") of a mutual fund. The Portfolios offer a range of investment
objectives, from conservative to aggressive. You bear the entire investment risk
on amounts allocated to the Subaccounts. The investment policies and risks of
each Portfolio are described in the accompanying prospectuses for the
Portfolios.
In some states, you may also allocate all or part of your Contract
Value to the "Fixed Account", as described in the answer to Question 5.
2. What Annuity Options does the Contract offer?
You may receive annuity payments on a fixed or a variable basis or a combination
of the two. We offer a variety of annuity options including:
o a life annuity with payments guaranteed for five to twenty years;
o a joint and full survivorship annuity, with payments guaranteed for five to
twenty years; and
o fixed payments for a specified period of five to thirty years.
Call us to inquire about other options.
You may change your annuity option at any time before annuitization.
You may select the date to annuitize the Contract. The date you select, however,
may be no later than the later of the tenth Contract Anniversary or the
Annuitant's 90th birthday. If your Contract was issued in connection with a
qualified plan, different deadlines may apply.
If you select annuity payments on a variable basis, the amount of our
payments to you will be affected by the investment performance of the
Subaccounts you have selected. The fixed portion of your annuity payments, on
the other hand, generally will be equal in amount to the initial payment we
determine. As explained in more detail below, however, during the Annuity Period
you will have a limited ability to change the relative weighting of the
Subaccounts on which your variable annuity payments are based or to increase the
portion of your annuity payments consisting of Fixed Annuity payments.
3. How do I buy a Contract?
You can obtain a Contract application from your Lincoln Benefit agent. You must
pay at least $25,000 in a lump sum as an initial Purchase Payment. Subsequent
Purchase Payments must be at least $500. We may lower these minimums at our sole
discretion. The maximum age of the oldest Contract Owner and Annuitant cannot
exceed age 90 as of the date we receive the completed application.
4. What are my investment choices under the Contract?
You can allocate and reallocate your investment among the Subaccounts, each of
which in turn invests in a single Portfolio. Under the Contract, the Separate
Account currently invests in the following Portfolios:
Fund Portfolio(s)
---- ------------
- ---------------------------------------------------------------------------------------------------------------------
The Alger American Fund Growth Portfolio
Income and Growth Portfolio
Leveraged AllCap Portfolio
MidCap Growth Portfolio
Small Capitalization Portfolio
- ---------------------------------------------------------------------------------------------------------------------
Federated Insurance Series Fund for U.S. Government Securities II
High Income Bond Fund II
Utility Fund II
- ---------------------------------------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund Asset Manager Portfolio
Contrafund Portfolio
Equity-Income Portfolio
Growth Portfolio
Index 500 Portfolio
Money Market Portfolio
Overseas Portfolio
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Aggressive Growth Portfolio: Institutional Shares
Balanced Portfolio: Institutional Shares
Flexible Income Portfolio: Institutional Shares
Global Value Portfolio: Service Shares
Growth Portfolio: Institutional Shares
Worldwide Growth Portfolio: Institutional Shares
- ----------------------------------------------------------------------------------------------------------------------
LSA Variable Series Trust Balanced Fund
Basic Value Fund
Diversified Mid-Cap Fund
Emerging Growth Equity Fund
Mid Cap Value Fund
Value Equity Fund
- ----------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust Emerging Growth Series
Investors Trust Series
New Discovery Series
Research Series
Total Return Series
- -----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Science and Technology Portfolio
Small Cap Portfolio
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds Main Street Small Cap Fund/VA - Service Shares
- ------------------------------------------------------------------------------------------------------------------------
PIMCO Variable Insurance Trust Foreign Bond Portfolio
Total Return Portfolio
- ------------------------------------------------------------------------------------------------------------------------
Putnam Variable Trust International Growth and Income Fund - Class 1B
- ------------------------------------------------------------------------------------------------------------------------
Scudder Variable Series I Balanced Portfolio
Bond Portfolio
Global Discovery Portfolio
Growth and Income Portfolio
International Portfolio
- ------------------------------------------------------------------------------------------------------------------------
STI Classic Variable Trust Capital Appreciation
International Equity
Value Income Stock
- ------------------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. Opportunity Fund II
- ------------------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc. MidCap Growth Fund II
- ------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Series, Inc. Equity Income Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Series, Inc. International Stock Portfolio
- ------------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust Growth and Income Portfolio, Class II
- ------------------------------------------------------------------------------------------------------------------------
Some of the Portfolios described in this Prospectus may not be
available in your Contract. Each Portfolio holds its assets separately from the
assets of the other Portfolios. Each Portfolio has distinct investment
objectives and policies which are described in the accompanying prospectuses for
the Portfolios.
5. What is the Fixed Account option?
We offer two Fixed Account interest crediting options: the Guaranteed Maturity
Fixed Account Option and the Dollar Cost Averaging Fixed Account Option. These
options may not be available in all states.
We will credit interest to amounts allocated to the Guaranteed Maturity
Fixed Account Option at a specified rate for a specified Guarantee Period. You
select the Guarantee Period for each amount that you allocate to the Guaranteed
Maturity Fixed Account Option. We will tell you what interest rates and
Guarantee Periods we are offering at a particular time. At the end of each
Guarantee Period, you may select a new Guarantee Period from among the choices
we are then making available or transfer or withdraw the relevant amount from
the Fixed Account without any Market Value Adjustment.
We may offer Guarantee Periods ranging from one to ten years in length.
We are currently offering Guarantee Periods of one, three, five, seven, and ten
years in length. In the future we may offer Guarantee Periods of different
lengths or stop offering some Guarantee Periods.
We will not change the interest rate credited to a particular
allocation until the end of the relevant Guarantee Period. From time to time,
however, we may change the interest rate that we offer to credit to new
allocations to the Guaranteed Maturity Fixed Account Option and to amounts
rolled over in the Fixed Account for new Guarantee Periods.
In addition, if you participate in our dollar cost averaging program,
you may designate amounts to be held in the Dollar Cost Averaging Fixed Account
Option until they are transferred monthly to the Subaccounts or Guarantee
Periods of your choosing. When you make an allocation to the Fixed Account for
this purpose, we will set an interest rate applicable to that amount. We will
then credit interest at that rate to that amount until it has been entirely
transferred monthly to your chosen Subaccounts or Guarantee Periods. We will
complete the transfers within one year of the allocation. In our discretion we
may change the rate that we set for new allocations to the Fixed Account for the
dollar cost averaging program. We will never, however, set a rate less than an
effective annual rate of 3%.
A Market Value Adjustment may increase or decrease the amount of
certain transactions involving the Fixed Account, to reflect changes in interest
rates. As a general rule, we will apply a Market Value Adjustment to the
following transactions:
(1) when you withdraw funds from the Guaranteed Maturity Fixed Account Option;
(2) when you transfer funds from the Guaranteed Maturity Fixed Account Option
to the Subaccounts;
(3) when you allocate part of your balance in the Guaranteed Maturity Fixed
Account Option to a new Guarantee Period before the end of the existing
Guarantee Period;
(4) when you annuitize your Contract; and
(5) when we pay a death benefit.
We will not apply a Market Value Adjustment to a transaction to the extent that:
(1) it occurs within 30 days after the end of a Guarantee Period applicable to
the funds involved in the transaction; (2) it is necessary to meet IRS minimum
withdrawal requirements; or (3) It is a transfer that is part of a dollar cost
averaging program.
We determine the amount of a Market Value Adjustment using a formula that takes
into consideration:
(1) whether current interest rates differ from interest rates at the beginning
of the applicable Guarantee Period; and (2) how many years are left until the
end of the Guarantee Period.
As a general rule, if interest rates have dropped, the Market Value Adjustment
will be an addition; if interest rates have risen, the Market Value Adjustment
will be a deduction. It is therefore possible that if you withdraw an amount
from the Fixed Account during a Guarantee Period, a Market Value Adjustment may
cause you to receive less than you initially allocated to the Fixed Account.
6. What are my expenses under the Contract?
Contract Maintenance Charge. During the Accumulation Period, each year we
subtract an annual contract maintenance charge of $35 from your Contract Value
allocated to the Subaccounts. We will waive this charge if you pay $50,000 or
more in Purchase Payments or if you allocate all of your Contract Value to the
Fixed Account.
During the Annuity Period, we will subtract the annual contract
maintenance charge in equal parts from your annuity payments. We waive this
charge if on the Annuity Date your Contract Value is $50,000 or more or if all
payments are Fixed Annuity payments.
Administrative Expense Charge and Mortality and Expense Risk Charge. We impose a
mortality and expense risk charge at an annual rate of 1.30% of average daily
net assets and an administrative expense charge at an annual rate of .10% of
average daily net assets. These charges are assessed each day during the
Accumulation Period and the Annuity Period. We guarantee that we will not raise
these charges.
Transfer Fee. Although we currently are not charging a transfer fee, the
Contract permits us to charge you up to $10 per transfer for each transfer after
the first transfer in each month.
Premium Taxes. Certain states impose a premium tax on annuity purchase payments
received by insurance companies. Any premium taxes relating to the Contract may
be deducted from Purchase Payments or the Contract Value when the tax is
incurred or at a later time. State premium taxes generally range from 0% to
3.5%.
Other Expenses. In addition to our charges under the Contract, each Portfolio
deducts amounts from its assets to pay its investment advisory fees and other
expenses.
7. How will my investment in the Contract be taxed?
You should consult a qualified tax adviser for personalized answers. Generally,
earnings under variable annuities are not taxed until amounts are withdrawn or
distributions are made. This deferral of taxes is designed to encourage
long-term personal savings and supplemental retirement plans. Withdrawals of
earnings are taxed as ordinary income and, if taken prior to age 59 1/2, may be
subject to an additional 10% federal tax penalty.
Special rules apply if the Contract is owned by a company or other
legal entity. Generally, such an owner must include in income any increase in
the excess of the Contract Value over the "investment in the contract" during
the taxable year.
8. Do I have access to my money?
At any time during the Accumulation Period, we will pay you all or part of the
value of your Contract, minus any applicable charge, if you surrender your
Contract or request a partial withdrawal. Under some plans, you may also take a
loan against the value of your Contract. Generally, a partial withdrawal must
equal at least $50, and after the withdrawal your remaining Contract Value must
at least equal $500.
Although you have access to your money during the Accumulation Period,
certain charges, such as the contract maintenance charge and premium tax
charges, may be deducted on a surrender or withdrawal. You may also incur
federal income tax liability or tax penalties. In addition, if you have
allocated some of the value of your Contract to the Fixed Account, the amount of
your surrender proceeds or withdrawal may be increased or decreased by a Market
Value Adjustment.
After annuitization, under certain settlement options you may be
entitled to withdraw the commuted value of the remaining payments.
9. What is the Death Benefit?
We will pay a death benefit while the Contract is in force and before the
Annuity Date, if the Contract Owner dies, or if the Annuitant dies and the
Contract Owner is not a natural person. To obtain payment of the Death Benefit,
the Beneficiary must submit to us a complete request for payment of the death
benefit, which includes due proof of death, as specified in the Contract.
The death benefit is the greatest of the following:
(1) your total Purchase Payments reduced by a withdrawal adjustment;
(2) your Contract Value;
(3) the amount you would have received by surrendering your Contract; or
(4) your highest Contract Value on any Contract Anniversary, increased by
the total Purchase Payments since that Contract Anniversary and
reduced by a withdrawal adjustment.
In relation to (1) and (4) above, the Death Benefit will be
recalculated for purchase payments, withdrawals, and on contract anniversaries
until the oldest Owner, or the Annuitant if the Owner is not a living
individual, attains age 85. After age 85, we will calculate (1) and (4) above
only to reflect additional purchase payments and withdrawals.
We will determine the value of the death benefit on the day that we
receive all of the information that we need to process the claim.
10. What else should I know?
Allocation of Purchase Payments. You allocate your initial Purchase Payment
among the Subaccounts and the Fixed Account in your Contract application. You
may make your allocations in specific dollar amounts or percentages, which must
be whole numbers that add up to 100%. When you make subsequent Purchase
Payments, you may again specify how you want your payments allocated. If you do
not, we will automatically allocate the payment based on your most recent
instructions. You may not allocate Purchase Payments to the Fixed Account if it
is not available in your state.
Transfers. During the Accumulation Period, you may transfer Contract Value among
the Subaccounts and from the Subaccounts to the Fixed Account. You may not make
a transfer, however, that would result in your allocating your Contract Value to
more than twenty-one options under the Contract. While you may also transfer
amounts from the Fixed Account, a Market Value Adjustment may apply. You may
instruct us to transfer Contract Value by writing or calling us.
You may also use our Automatic Dollar Cost Averaging or Portfolio
Rebalancing Programs. You may not use both programs at the same time.
Under the Dollar Cost Averaging program, amounts are automatically
transferred at regular intervals from the Fixed Account or a Subaccount of your
choosing, including other Subaccounts or the Fixed Account. Transfers from the
Dollar Cost Averaging Fixed Account may be made monthly only. Transfers from
Subaccounts may be made monthly, quarterly, or annually.
Under the Portfolio Rebalancing program, you can maintain the
percentage of your Contract Value allocated to each Subaccount at a pre-set
level. Investment results will shift the balance of your Contract Value
allocations. If you elect rebalancing, we will automatically transfer your
Contract Value back to the specified percentages at the frequency (monthly,
quarterly, semiannually, annually) that you specify. We will automatically
terminate this program if you request a transfer outside of the program. You may
not include the Fixed Account in a portfolio rebalancing program. You also may
not elect rebalancing after annuitization.
During the Annuity Period, you may not make any transfers for the first
six months after the Annuity Date. Thereafter, you may make transfers among the
Subaccounts or from the Subaccounts to increase your Fixed Annuity payments.
Your transfers, however, must be at least six months apart. You may not convert
any portion of your right to receive Fixed Annuity payments into Variable
Annuity payments.
Free-Look Period. You may cancel the Contract by returning it to us within 10
days after you receive it, or after whatever longer period may be permitted by
state law. You may return it by delivering it or mailing it to us. If you return
the Contract, the Contract terminates and, in most states, we will pay you an
amount equal to the Contract Value on the date we receive the Contract from you.
The Contract Value may be more or less than your Purchase Payments. In some
states, we are required to send you the amount of your Purchase Payments. Since
state laws differ as to the consequences of returning a Contract, you should
refer to your Contract for specific information about your circumstances.
11. Who can I contact for more information?
You can write to us at Lincoln Benefit Life Company, P.O. Box 82532,
Lincoln, Nebraska 68501-2532, or call us at (800)865-5237.
CONDENSED FINANCIAL INFORMATION
Attached as Appendix A is a table showing selected information
concerning Accumulation Unit Values for each Subaccount for each year since we
started offering the Contracts. Accumulation Unit Value is the unit of measure
that we use to calculate the value of your interest in a Subaccount.
Accumulation Unit Value does not reflect the deduction of certain charges that
are subtracted from your Contract Value, such as the Annual Contract Maintenance
Charge. The information in the table is included in the Separate Account's
financial statements. To obtain a fuller picture of each subaccounts finances
and performance, you should review the Separate Account's financial statements,
which are in the Separate Account's Annual Report dated as of December 31, 2001,
contained in the Statement of Additional Information. The Statement of
Additional Information also includes a brief explanation of how performance of
the Subaccounts is calculated. We have included Lincoln Benefit's financial
statements in its Annual Report on Form 10-K for the year ended December 31,
2001, incorporated herein by reference.
DESCRIPTION OF THE CONTRACTS
Summary. The Contract is a deferred annuity contract designed to aid you in
long-term financial planning. You may add to the Contract Value by making
additional Purchase Payments. In addition, the Contract Value will change to
reflect the performance of the Subaccounts to which you allocate your Purchase
Payments and your Contract Value, as well as to reflect interest credited to
amounts allocated to the Fixed Account. You may withdraw your Contract Value by
making a partial withdrawal or by surrendering your Contract. Upon
annuitization, we will pay you benefits under the Contract in the form of an
annuity, either for the life of the Annuitant or for a fixed number of years.
All of these features are described in more detail below.
Contract Owner. As the Contract Owner, you are the person usually entitled to
exercise all rights of ownership under the Contract. You usually are also the
person entitled to receive benefits under the Contract or to choose someone else
to receive benefits. If your Contract was issued under a Qualified Plan,
however, the Plan may limit or modify your rights and privileges under the
Contract and may limit your right to choose someone else to receive benefits.
The maximum age of the oldest Contract Owner cannot exceed age 90 as of the date
we receive the completed application. The Contract cannot be jointly owned by
both a non-natural person and a natural person. Changing ownership of this
Contract may cause adverse tax consequences and may not be allowed under
qualified plans. Please consult with a competent tax advisor prior to making a
request for a change of Contract Owner. If the Contract Owner is a grantor
trust, the Contract Owner will be considered a non-living person for purposes of
this section and the Death Benefit section.
Annuitant. The Annuitant is the living person whose life span is used to
determine annuity payments. You initially designate an Annuitant in your
application. You may change the Annuitant at any time before annuity payments
begin. If your Contract was issued under a plan qualified under Section 403(b),
408 or 408A of the Tax Code, you must be the Annuitant. You may also designate a
Joint Annuitant, who is a second person on whose life annuity payments depend.
Additional restrictions may apply in the case of Qualified Plans. If you are not
the Annuitant and the Annuitant dies before annuity payments begin, then either
you become the new Annuitant or you must name another person as the new
Annuitant. You must attest that the Annuitant is alive in order to annuitize
your Contract.
Modification of the Contract. Only a Lincoln Benefit officer may approve a
change in or waive any provision of the Contract. Any change or waiver must be
in writing. None of our agents has the authority to change or waive the
provisions of the Contract.
We are permitted to change the terms of the Contract if it is necessary
to comply with changes in the law. If a provision of the Contract is
inconsistent with state law, we will follow state law.
Assignment. Before the Annuity Date, if the Annuitant is still alive, you may
assign a Contract issued under a Non-Qualified Plan that is not subject to Title
1 of the Employee Retirement Income Security Act of 1974 ("ERISA"). If a
Contract is issued pursuant to a Qualified Plan or a Non-Qualified Plan that is
subject to Title 1 of ERISA, the law prohibits some types of assignments,
pledges and transfers and imposes special conditions on others. An assignment
may also result in taxes or tax penalties.
We will not be bound by any assignment until we receive written notice
of it. Accordingly, until we receive written notice of an assignment, we will
continue to act as though the assignment had not occurred. We are not
responsible for the validity of any assignment.
Because of the potential tax consequences and ERISA issues arising from
an assignment, you should consult with an attorney before trying to assign your
Contract.
Free Look Period. You may cancel the Contract by returning it to us within 10
days after you receive it, or within whatever longer period may be permitted by
state law. You may return it by delivering it to your agent or mailing it to us.
If you return the Contract, the Contract terminates and, in most states, we will
pay you an amount equal to the Contract Value on the date we receive the
Contract from you. The Contract Value at that time may be more or less than your
Purchase Payments.
In some states, if you exercise your "free look" rights, we are
required to return the amount of your Purchase Payments. Currently, if you live
in one of those states, on the Issue Date we will allocate your Purchase Payment
to the Subaccounts and the Fixed Account Options as you specified in your
application. However, we reserve the right in the future to delay allocating
your Purchase Payments to the Subaccounts you have selected or to the Fixed
Account until 20 days after the Issue Date or, if your state's free look period
is longer than ten days, for ten days plus the period required by state law.
During that time, we will allocate your Purchase Payment to the Fidelity Money
Market Subaccount. Your Contract will contain specific information about your
free-look rights in your state.
PURCHASES AND CONTRACT VALUE
Minimum Purchase Payment. The minimum initial Purchase Payment for a Contract is
$25,000. You must pay it in a lump sum. You may not pay more than $1 million in
Purchase Payments without our prior approval. As a general rule, subsequent
Purchase Payments may be made in amounts of $500 or more. We may lower these
minimums if we choose. We may refuse any Purchase Payment at any time.
Automatic Payment Plan. You may make scheduled Purchase Payments of $100 or more
per month by automatic payment through your bank account. Call or write us for
an enrollment form.
Allocation of Purchase Payments. Your Purchase Payments are allocated to the
Subaccount(s) and the Fixed Account in the proportions that you have selected.
You must specify your allocation in your Contract application, either as
percentages or specific dollar amounts. If you make your allocation in
percentages, the total must equal 100%. We will allocate your subsequent
Purchase Payments in those percentages, until you give us new allocation
instructions. You may not allocate Purchase Payments to the Fixed Account if it
is not available in your state.
You initially may allocate your Purchase Payments to up to twenty-one
options, counting each Subaccount and the Fixed Account as one option. For this
purpose, we will treat all of your allocations to the Fixed Account as one
option, even if you choose more than one Guarantee Period. You may add or delete
Subaccounts and/or the Fixed Account from your allocation instructions, but we
will not execute instructions that would cause you to have Contract Value in
more than twenty-one options. In the future, we may waive this limit.
If your application is complete, we will issue your Contract within two
business days of its receipt at our P.O. Box shown on the first page of this
prospectus. If your application for a Contract is incomplete, we will notify you
and seek to complete the application within five business days. For example, if
you do not fill in allocation percentages, we will contact you to obtain the
missing percentages. If we cannot complete your application within five business
days after we receive it, we will return your application and your Purchase
Payment, unless you expressly permit us to take a longer time.
Usually, we will allocate your initial Purchase Payment to the
Subaccounts and the Fixed Account, as you have instructed us, on the Issue Date.
We will allocate your subsequent Purchase Payments on the date that we receive
them at the next computed Accumulation Unit Value.
In some states, however, we are required to return at least your
Purchase Payment if you cancel your Contract during the "free-look" period. In
those states, we currently will allocate your Purchase Payments on the Issue
Date as you have instructed us, as described above. In the future, however, we
reserve the right, if you live in one of those states, to allocate all Purchase
Payments received during the "free-look period" to the Fidelity Money Market
Subaccount. If we exercise that right and your state's free-look period is ten
days, we will transfer your Purchase Payments to your specified Subaccounts or
Fixed Account 20 days after the Issue Date; if your state's free look period is
longer, we will transfer your Purchase Payment after ten days plus the period
required by state law have passed.
We determine the number of Accumulation Units in each Subaccount to
allocate to your Contract by dividing that portion of your Purchase Payment
allocated to a Subaccount by that Subaccount's Accumulation Unit Value on the
Valuation Date when the allocation occurs.
Contract Value. We will establish an account for you and will maintain your
account during the Accumulation Period. The total value of your Contract at any
time is equal to the sum of the value of your Accumulation Units in the
Subaccounts you have selected, plus the value of your investment in the Fixed
Account.
Separate Account Accumulation Unit Value. As a general matter, the Accumulation
Unit Value for each Subaccount will rise or fall to reflect changes in the share
price of the Portfolio in which the Subaccount invests. In addition, we subtract
from Accumulation Unit Value amounts reflecting the mortality and expense risk
charge, administrative expense charge, and any provision for taxes that have
accrued since we last calculated the Accumulation Unit Value. We determine
transfer fees and contract maintenance charges separately for each Contract.
They do not affect Accumulation Unit Value. Instead, we obtain payment of those
charges and fees by redeeming Accumulation Units.
We determine a separate Accumulation Unit Value for each Subaccount. If
we elect or are required to assess a charge for taxes, we may calculate a
separate Accumulation Unit Value for Contracts issued in connection with
Non-Qualified and Qualified Plans, respectively, within each Subaccount. We
determine the Accumulation Unit Value for each Subaccount Monday through Friday
on each day that the New York Stock Exchange is open for business.
You should refer to the prospectuses for the Portfolios which accompany
this prospectus for a description of how the assets of each Portfolio are
valued, since that determination has a direct bearing on the Accumulation Unit
Value of the corresponding Subaccount and, therefore, your Contract Value.
Transfer During Accumulation Period. During the Accumulation Period, you may
transfer Contract Value among the Fixed Account and the Subaccounts in writing
or by telephone. Currently, there is no minimum transfer amount. The Contract
permits us to set a minimum transfer amount in the future. You may not make a
transfer that would result in your allocating your Contract Value to more than
twenty-one options under the Contract at one time.
As a general rule, we only make transfers on days when we and the NYSE
are open for business. If we receive your request on one of those days, we will
make the transfer that day. We close our offices for business on certain days
immediately preceding or following certain national holidays when the NYSE is
open for business. For calendar year 2002, our offices will be closed on July
5th and November 29th . For transfers requested on these days, we will make the
transfer on the first subsequent day on which we and the NYSE are open.
If you transfer an amount from the Fixed Account to a Subaccount before
the end of the applicable Guarantee Period or you allocate an amount in the
Fixed Account to a new Guarantee Period before the end of the existing Guarantee
Period, we usually will increase or decrease the amount by a Market Value
Adjustment. The calculation of the Market Value Adjustment is described in
"Market Value Adjustment" on page [ ].
Transfers within 30 days after the end of the applicable Guarantee
Period are not subject to a Market Value Adjustment.
The Contract permits us to defer transfers from the Fixed Account for
up to six months from the date you ask us.
You may not transfer Contract Value into the Dollar Cost Averaging
Fixed Account Option. You may not transfer Contract Value out of the Dollar Cost
Averaging Fixed Account Option except as part of a Dollar Cost Averaging
program.
Transfers Authorized by Telephone. You may make transfers by telephone, if you
first send us a completed authorization form. The cut off time for telephone
transfer requests is 4:00 p.m. Eastern time. Calls completed before 4:00 p.m.
will be effected on that day at that day's price. Calls completed after 4:00
p.m. will be effected on the next day on which we and the NYSE are open for
business, at that day's price.
We may charge you the transfer fee described on page [ ], although we
currently are waiving it. In addition, we may suspend, modify or terminate the
telephone transfer privilege at any time without notice.
We use procedures that we believe provide reasonable assurance that
telephone authorized transfers are genuine. For example, we tape telephone
conversations with persons purporting to authorize transfers and request
identifying information. Accordingly, we disclaim any liability for losses
resulting from allegedly unauthorized telephone transfers. However, if we do not
take reasonable steps to help ensure that a telephone authorization is valid, we
may be liable for such losses.
Excessive Trading Limits. If allowed in your state, we reserve the right to
limit transfers in any Contract Year, or to refuse any transfer request for a
Contract owner or certain Contract owners, if:
o we believe, in our sole discretion, that excessive trading by such
Contract owner or owners, or a specific transfer request or group
of transfer requests, may have a detrimental effect on the
Accumulation Unit Values of any Variable Sub-Account or the share
prices of the corresponding Funds or would be to the disadvantage
of other Contract owners; or
o we are informed by one or more of the corresponding Funds that
they intend to restrict the purchase or redemption of Fund shares
because of excessive trading or because they believe that a
specific transfer or groups of transfers would have a detrimental
effect on the prices of Fund shares.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract owners.
Automatic Dollar Cost Averaging Program. Under our Automatic Dollar Cost
Averaging Program, you may authorize us to transfer a fixed dollar amount at
fixed intervals from the Dollar Cost Averaging Fixed Account Option or a
Subaccounts of your choosing, including other Subaccounts or the Guaranteed
Maturity Fixed Account Option. The interval between transfers from the Dollar
Cost Averaging Fixed Account may be monthly only. The interval between transfers
from Subaccounts may be monthly, quarterly, or annually, at your option. The
transfers will be made at the Accumulation Unit Value on the date of the
transfer. The transfers will continue until you instruct us otherwise, or until
your chosen source of transfer payments is exhausted. Currently, the minimum
transfer amount is $100 per transfer. However, if you wish to Dollar Cost
Average to a Guaranteed Maturity Fixed Account Option, the minimum amount that
must be transferred into any one Option is $500. We may change this minimum or
grant exceptions. If you elect this program, the first transfer will occur
twenty-five days after your Issue Date. You may not use the Dollar Cost
Averaging program to transfer amounts from the Guaranteed Maturity Fixed Account
Option.
Your request to participate in this program will be effective when we
receive your completed application at the P.O. Box given on the first page of
this prospectus. Call or write us for a copy of the application. You may elect
to increase, decrease or change the frequency or amount of transfers under a
Dollar Cost Averaging program. We will not charge a transfer fee for Dollar Cost
Averaging.
The theory of dollar cost averaging is that by spreading your
investment over time, you may be able to reduce the effect of transitory market
conditions on your investment. In addition, because a given dollar amount
purchases more units when the unit prices are relatively low rather than when
the prices are higher, in a fluctuating market, the average cost per unit may be
less than the average of the unit prices on the purchase dates. However,
participation in this program does not assure you of a greater profit from your
purchases under the program, nor will it prevent or necessarily reduce losses in
a declining market. Moreover, while we refer to this program of periodic
transfers generally as dollar cost averaging, periodic transfer from a
Subaccount with more volatile performance experience is unlikely to produce the
desired effects of dollar cost averaging as would transfers from a less volatile
subaccount. You may not use Dollar Cost Averaging and Portfolio Rebalancing at
the same time.
Portfolio Rebalancing. Portfolio Rebalancing allows you to maintain the
percentage of your Contract Value allocated to each Subaccount at a pre-set
level. For example, you could specify that 30% of your Contract Value should be
in the Balanced Portfolio, 40% in the Growth Portfolio-Janus Aspen Series and
30% in Federated High Income Bond Fund II. Over time, the variations in each
Subaccount's investment results will shift the balance of your Contract Value
allocations. Under the Portfolio Rebalancing feature, each period, if the
allocations change from your desired percentages, we will automatically transfer
your Contract Value, including new Purchase Payments (unless you specify
otherwise), back to the percentages you specify. Portfolio Rebalancing is
consistent with maintaining your allocation of investments among market
segments, although it is accomplished by reducing your Contract Value allocated
to the better performing segments.
You may choose to have rebalances made monthly, quarterly,
semi-annually, or annually until your Annuity Date. Portfolio Rebalancing is not
available after you annuitize. We will not charge a transfer fee for Portfolio
Rebalancing. We will automatically terminate this program if you request any
transfer outside of the Portfolio Rebalancing program. If you wish to resume
Portfolio Rebalancing after it has been cancelled, then you must complete a new
Rebalancing form and send it to our home office. You may not include the Fixed
Account in a Portfolio Rebalancing program.
You may request Portfolio Rebalancing at any time before your Annuity
Date by submitting a completed written request to us at the P.O. Box given on
the first page of this prospectus. Please call or write us for a copy of the
request form. If you stop Portfolio Rebalancing, you must wait 30 days to begin
again. In your request, you may specify a date for your first rebalancing. If
you specify a date fewer than 30 days after your Issue Date, your first
rebalance will be delayed one month. If you request Portfolio Rebalancing in
your Contract application and do not specify a date for your first rebalancing,
your first rebalance will occur one period after the Issue Date. For example, if
you specify quarterly rebalancing, your first rebalance will occur three months
after your Issue Date. Otherwise, your first rebalancing will occur twenty-five
days after we receive your completed request form. All subsequent rebalancing
will occur at the intervals you have specified on the day of the month that
coincides with the same day of the month as your Contract Anniversary Date.
Generally, you may change the allocation percentages, frequency, or
choice of Subaccounts at any time. If your total Contract Value subject to
rebalancing falls below any minimum value that we may establish, we may prohibit
or limit your use of Portfolio Rebalancing. You may not use Dollar Cost
Averaging and Portfolio Rebalancing at the same time. We may change, terminate,
limit, or suspend Portfolio Rebalancing at any time.
THE INVESTMENT AND FIXED ACCOUNT OPTIONS
Separate Account Investments
The Portfolios. Each of the Subaccounts of the Separate Account invests in the
shares of one of the Portfolios. Each Portfolio is either an open-end management
investment company registered under the Investment Company Act of 1940 or a
separate investment series of an open-end management investment company. We have
briefly described the Portfolios below. You should consult the current
prospectuses for the Portfolios for more detailed and complete information
concerning the Portfolios. If you do not have a prospectus for a Portfolio,
contact us and we will send you a copy. Appendix B contains a description of how
advertised performance data for the Subaccounts are computed.
Some of the Portfolios have been established by investment advisers
which manage publicly traded mutual funds having similar names and investment
objectives. While some of the Portfolios may be similar to, and may in fact be
modeled after publicly traded mutual funds, you should understand that the
Portfolios are not otherwise directly related to any publicly traded mutual
fund. Consequently, the investment performance of publicly traded mutual funds
and any similarly named Portfolio may differ substantially.
We do not promise that the Portfolios will meet their investment
objectives. Amounts you have allocated to Subaccounts may grow in value, decline
in value, or grow less than you expect, depending on the investment performance
of the Portfolios in which those Subaccounts invest. You bear the investment
risk that those Portfolios possibly will not meet their investment objectives.
You should carefully review their prospectuses before allocating amounts to the
Subaccounts of the Separate Account.
Portfolio Portfolio Objective Investment Adviser
The Alger American Fund Fred Alger Management, Inc.
Growth Portfolio Long-term capital appreciation
Income & Growth Portfolio Seeks to provide a high level of dividend
income. Its secondary goal is to provide
capital appreciation.
Leveraged AllCap Portfolio Long-term capital appreciation
MidCap Growth Portfolio Long-term capital appreciation
Small Capitalization Portfolio Long-term capital appreciation
Federated Insurance Series Federated Investment Management
Company
Fund for U.S. Government Securities II Current income
High Income Bond Fund II High current income
Utility Fund II High current income and moderate capital
appreciation
Fidelity Variable Insurance Products Funds Fidelity Management & Research
Company
Asset Manager Portfolio High total return with reduced risk over the
long term
Contrafund Portfolio Long-term capital appreciation
Equity-Income Portfolio Reasonable income
Growth Portfolio Capital appreciation
Index 500 Portfolio Investment results that correspond to the total
return of common stocks publicly
traded in the United States, as
represented by the S&P 500.
Money Market Portfolio As high a level
of current income as is
consistent with preserving
capital and providing liquidity.
Overseas Portfolio Long-term growth of capital
Janus Aspen Series Janus Capital Management LLC
Aggressive Growth Portfolio: Long-term growth of capital
Institutional Shares
Balanced Portfolio: Institutional Shares Long-term growth of capital consistent with
preservation of capital and balanced by current
income.
Flexible Income Portfolio: Institutional Seeks to maximize total return from a
Shares combination of current income and capital
appreciation, with an emphasis on current
income.
Global Value Portfolio: Service Shares Long-term growth of capital
Growth Portfolio: Institutional Shares Long-term growth of capital in a manner
consistent with the preservation of capital.
Worldwide Growth Portfolio: Institutional Long-term growth of capital in a manner
Shares consistent with the preservation of capital.
LSA Variable Series Trust LSA Asset Management LLC
Balanced Fund (1) Combination of growth of capital and investment
income (growth of capital is the primary
objective) by investing in a mix of equity and
debt.
Basic Value Fund (2) Long-term growth of capital.
Diversified Mid-Cap Fund (3) Long-term growth of capital.
Emerging Growth Equity Fund (4) Capital appreciation through investing in
smaller rapidly growing emerging companies.
Mid Cap Value Fund (5) Long-term capital growth.
Value Equity Fund (6) Long-term growth of capital with current income
as a secondary objective.
MFS Variable Insurance Trust MFS Investment Management(R)
Emerging Growth Series - Initial Class Long-term growth of capital
Investors Trust Series - Initial Class Long-term growth of capital with a secondary
objective to seek reasonable current income
New Discovery Series - Initial Class Capital appreciation
Research Series - Initial Class Long-term growth of capital and future income
Total Return Series - Initial Class Seeks to provide above-average income
(compared
to a portfolio invested entirely in equity
securities) consistent with the prudent
employment of capital and secondarily to
provide a reasonable opportunity for growth of
capital and income.
OCC Accumulation Trust OpCap Advisors
Science and Technology Portfolio Capital appreciation
Small Cap Portfolio Capital appreciation
Oppenheimer Variable Account Funds OppenheimerFunds, Inc.
Main Street Small Cap Fund/VA - Service Capital appreciation
Class
PIMCO Variable Insurance Trust Pacific Investment Management
Foreign Bond Portfolio To maximize total return, consistent with Company
preservation of capital and prudent investment
management.
Total Return Portfolio To maximize
total return, consistent with
preservation of capital and
prudent investment management.
Putnam Variable Trust Putnam Investment Management, Inc.
International Growth and Income Fund - Capital growth. Current income is a secondary
Class IB objective.
Scudder Variable Series I Deutsche Investment Management
(Americas) Inc.
Balanced Portfolio Balance of growth and
income, and also long-term
preservation of capital.
Bond Portfolio Invest for a high level
of income consistent with a high
quality portfolio of debt
securities.
Global Discovery Portfolio Above average
capital appreciation over the
long-term.
Growth and Income Portfolio Long-term
growth of capital, current income
and growth of income.
International Portfolio Seeks long-term growth of capital.
STI Classic Variable Trust Trusco Capital Management
Capital Appreciation Fund Capital appreciation
International Equity Fund Long-term capital appreciation
Value Income Stock Fund Current income with the secondary goal of
capital appreciation
Strong Opportunity Fund II, Inc. Strong Capital Management, Inc.
Opportunity Fund II Capital growth
Strong Variable Insurance Funds, Inc. Strong Capital Management, Inc.
Mid Cap Growth Fund II Capital growth
T. Rowe Price Equity Series, Inc. T. Rowe Price Associates
Equity Income Portfolio Seeks to provide substantial dividend income as
well as long-term growth of capital
Mid-Cap Growth Portfolio Long-term growth of capital
New America Growth Portfolio Long-term growth of capital
T. Rowe Price International Series, Inc. T. Rowe Price International, Inc.
International Stock Portfolio Long-term growth of capital
Van Kampen Life Investment Trust Van Kampen Asset Management Inc.
Growth and Income Portfolio, Class II Long-term growth of capital and income
1. Sub-advised by OpCap Advisors.
2. Sub-Advised by A I M Capital Management, Inc.
3. Sub-advised by Fidelity Management & Research Company.
4. Sub-advised by RS Investment Management, L.P.
5. Sub-advised by Van Kampen Asset Management Inc.
6. Sub-Advised by Salomon Brothers Asset Management Inc.
Each Portfolio is subject to certain investment restrictions and
policies which may not be changed without the approval of a majority of the
shareholders of the Portfolio. See the accompanying prospectuses of the
Portfolios for further information.
We automatically reinvest all dividends and capital gains distributions
from the Portfolios in shares of the distributing Portfolio at their net asset
value. The income and realized and unrealized gains or losses on the assets of
each Subaccount are separate and are credited to or charged against the
particular Subaccount without regard to income, gains or losses from any other
Subaccount or from any other part of our business. We will use the net Purchase
Payments you allocate to a Subaccount to purchase shares in the corresponding
Portfolio and will redeem shares in the Portfolios to meet Contract obligations
or make adjustments in reserves. The Portfolios are required to redeem their
shares at net asset value and to make payment within seven days.
Certain of the Portfolios sell their shares to separate accounts
underlying both variable life insurance and variable annuity contracts. It is
conceivable that in the future it may be unfavorable for variable life insurance
separate accounts and variable annuity separate accounts to invest in the same
Portfolio. Although neither we nor any of the Portfolios currently foresees any
such disadvantages either to variable life insurance or variable annuity
contract owners, each Portfolio's Board of Directors intends to monitor events
in order to identify any material conflicts between variable life and variable
annuity contract owners and to determine what action, if any, should be taken in
response thereto. If a Board of Directors were to conclude that separate
investment funds should be established for variable life and variable annuity
separate accounts, Lincoln Benefit will bear the attendant expenses.
Voting Rights. As a general matter, you do not have a direct right to
vote the shares of the Portfolios held by the Subaccounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. We will
notify you when your instructions are needed. We will also provide proxy
materials or other information to assist you in understanding the matter at
issue. We will determine the number of shares for which you may give voting
instructions as of the record date set by the relevant Portfolio for the
shareholder meeting at which the vote will occur.
As a general rule, before the Annuity Date, you are the person entitled
to give voting instructions. After the Annuity Date, the payee is that person.
Retirement plans, however, may have different rules for voting by plan
participants.
If you send us written voting instructions, we will follow your
instructions in voting the Portfolio shares attributable to your Contract. If
you do not send us written instructions, we will vote the shares attributable to
your Contract in the same proportions as we vote the shares for which we have
received instructions from other Contract Owners. We will vote shares that we
hold in the same proportions as we vote the shares for which we have received
instructions from other Contract Owners.
We may, when required by state insurance regulatory authorities,
disregard Contract Owner voting instructions if the instructions require that
the shares be voted so as to cause a change in the sub-classification or
investment objective of one or more of the Portfolios or to approve or
disapprove an investment advisory contract for one or more of the Portfolios.
In addition, we may disregard voting instructions in favor of changes
initiated by Contract Owners in the investment objectives or the investment
adviser of the Portfolios if we reasonably disapprove of the proposed change. We
would disapprove a proposed change only if the proposed change is contrary to
state law or prohibited by state regulatory authorities or we reasonably
conclude that the proposed change would not be consistent with the investment
objectives of the Portfolio or would result in the purchase of securities for
the Portfolio which vary from the general quality and nature of investments and
investment techniques utilized by the Portfolio. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report to you.
This description reflects our view of currently applicable law. If the
law changes or our interpretation of the law changes, we may decide that we are
permitted to vote the Portfolio shares without obtaining instructions from our
Contract Owners, and we may choose to do so.
Additions, Deletions, and Substitutions of Securities. If the shares of
any of the Portfolios are no longer available for investment by the Separate
Account or if, in the judgment of our Board of Directors, further investment in
the shares of a Portfolio is no longer appropriate in view of the purposes of
the Contract, we may add or substitute shares of another Portfolio or mutual
fund for Portfolio shares already purchased or to be purchased in the future by
Purchase Payments under the Contract. Any substitution will comply with the
requirements of the 1940 Act.
We also reserve the right to make the following changes in the
operation of the Separate Account and the Subaccounts:
(a) to operate the Separate Account in any form permitted by law;
(b) to take any action necessary to comply with applicable law or obtain
and continue any exemption from applicable laws;
(c) to transfer assets from one Subaccount to another, or from any
Subaccount to our general account;
(d) to add, combine, or remove Subaccounts in the Separate Account; and
(e) to change the way in which we assess charges, as long as the total
charges do not exceed the amount currently charged the Separate
Account and the Portfolios in connection with the Contracts.
If we take any of these actions, we will comply with the then
applicable legal requirements.
THE FIXED ACCOUNT
General. You may allocate part or all of your Purchase Payments to the Fixed
Account in states where it is available. Amounts allocated to the Fixed Account
become part of the general assets of Lincoln Benefit. Allstate Life invests the
assets of the general account in accordance with applicable laws governing the
investments of insurance company general accounts. The Fixed Account may not be
available in all states. Please contact us at 1-800-865-5237 for current
information.
Guaranteed Maturity Fixed Account Option. We will credit interest to each amount
allocated to the Guaranteed Maturity Fixed Account Option at a specified rate
for a specified Guarantee Period. You select the Guarantee Period for each
amount that you allocate to this option. We will declare the interest rate that
we will guarantee to credit to that amount for that Guarantee Period. Each
amount allocated to a Guarantee Period under this option must be at least $500.
We reserve the right to limit the number of additional Purchase Payments that
may be allocated to this option.
We will tell you what interest rates and Guarantee Periods we are
offering at a particular time. We may offer Guarantee Periods ranging from one
to ten years in length. We will decide in our discretion which Guarantee Periods
to offer. Currently, we offer Guarantee Periods of one, three, five, seven and
ten years. In the future we may offer Guarantee Periods of different lengths or
stop offering some Guarantee Periods.
We will credit interest daily to each amount allocated to a Guarantee
Period under this option at a rate which compounds to the effective annual
interest rate that we declared at the beginning of the applicable Guarantee
Period. We will not change the interest rate credited to a particular allocation
until the end of the relevant Guarantee Period. We may declare different
interest rates for Guarantee Periods of the same length that begin at different
times.
The following example illustrates how a Purchase Payment allocated to
this option would grow, given an assumed Guarantee Period and effective annual
interest rate:
Example
Purchase Payment $50,000
Guarantee Period 5 years
Effective Annual Rate 4.50%
END OF CONTRACT YEAR
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
------ ------ ------ ------ ------
Beginning Contract Value $50,000.00
x (1 + Effective Annual Rate) x 1.045
----------
$52,250.00
Contract Value at end of Contract Year $52,250.00
x (1 + Effective Annual Rate) x 1.045
----------
$54,601.25
Contract Value at end of Contract Year $54,601.25
X (1 + Effective Annual Rate) x 1.045
----------
$57,058.31
Contract Value at end of Contract Year $57,058.31
x (1 + Effective Annual Rate) x 1.045
----------
$59,625.93
Contract Value at end of Contract Year $59,625.93
x (1 + Effective Annual Rate) x 1.045
----------
$62,309.10
Total Interest Credited During Guarantee Period
= $12,309.10 ($62,309.10 - $50,000)
Note: This example assumes no withdrawals during the entire five year Guarantee
Period. If you were to make a partial withdrawal, the amount withdrawn might be
increased or decreased by a Market Value Adjustment. The hypothetical interest
rate is for illustrative purposes only and is not intended to predict future
interest rates to be declared under the Contract.
We have no specific formula for determining the rate of interest that
we will declare initially or in the future. We will set those interest rates
based on relevant factors such as then current interest rates, regulatory and
tax requirements, our sales commission and administrative expenses, general
economic trends, and competitive factors. For current interest rate information,
please contact us at 1-800-865-5237.
We will determine the interest rates to be declared in our sole
discretion. We can neither predict nor guarantee what those rates will be in the
future.
At the end of each Guarantee Period, we will mail you a notice asking
you what to do with the relevant amount, including the accrued interest. During
the 30-day period after the end of the Guarantee Period, you may:
(1) take no action. If so, we will automatically keep the relevant amount
in the Guaranteed Maturity Fixed Account Option. The new Guarantee
Period will be the same length as the expiring Guarantee Period and
will begin on the day the previous Guarantee Period ends. The new
interest rate will be our then current declared rate for Guarantee
Periods of that length; or
(2) allocate the relevant Contract Value to one or more new Guarantee
Periods of your choice in the Guaranteed Maturity Fixed Account
Option. The new Guarantee Period(s) will begin on the day the previous
Guarantee Period ends. The new interest rate will be our then current
declared rate for those Guarantee Periods; or
(3) instruct us to transfer all or a portion of the relevant amount to one
or more Subaccounts. We will effect the transfer on the day we receive
your instructions. We will not adjust the amount transferred to
include a Market Value Adjustment; or
(4) withdraw all or a portion of the relevant amount through a partial
withdrawal. We will not adjust the amount withdrawn to include a
Market Value Adjustment. The amount withdrawn will be deemed to have
been withdrawn on the day the Guarantee Period ends.
Under our Automatic Laddering Program, you may choose, in advance, to
use Guarantee Periods of the same length for all renewals in the Guaranteed
Maturity Fixed Account Option. You can select this program at any time during
the Accumulation Period, including on the Issue Date. We will apply renewals to
Guarantee Periods of the selected length until you direct us in writing to stop.
We may stop offering this program at any time.
Market Value Adjustment. We may increase or decrease the amount of some
transactions involving your investment in the Fixed Account to include a Market
Value Adjustment. The formula for determining Market Value Adjustments reflects
changes in interest rates since the beginning of the relevant Guarantee Period.
As a result, you will bear some of the investment risk on amounts allocated to
the Guaranteed Maturity Fixed Account Option.
As a general rule, we will apply a Market Value Adjustment to the
following transactions involving your Fixed Account balance:
(1) when you withdraw funds from the Guaranteed Maturity Fixed Account
Option;
(2) when you transfer funds from the Guaranteed Maturity Fixed Account
Option to the Subaccounts;
(3) when you allocate part of your balance in the Guaranteed Maturity
Fixed Account Option to a new Guarantee Period before the end of the
existing Guarantee Period;
(4) when you annuitize your Contract; and
(5) when we pay a death benefit.
We will not apply a Market Value Adjustment to a transaction, to the
extent that:
(1) it occurs within 30 days after the end of a Guarantee Period applicable to
the funds involved in the transaction; or (2) you make a withdrawal to satisfy
the IRS' required minimum distribution rules for this Contract; or (3) it is a
transfer that is part of a dollar cost averaging program.
The formula for calculating Market Value Adjustments is set forth in
Appendix C to this prospectus, which also contains additional examples of the
application of the Market Value Adjustment. This formula primarily compares:
(1) the Treasury Rate at the time of the relevant transaction for a
maturity equal in length to the relevant Guarantee Period; and
(2) the Treasury Rate at the beginning of the Guarantee Period for a
maturity equal in length to the Guarantee Period.
Generally, if the Treasury Rate at the beginning of the Guarantee Period is
higher than the corresponding current Treasury Rate, then the Market Value
Adjustment will increase the amount payable to you or transferred. Similarly, if
the Treasury Rate at the beginning of the Guarantee Period is lower than the
corresponding current Treasury Rate, then the Market Value Adjustment will
reduce the amount payable to you or transferred.
For example, assume that you purchased a Contract and selected an
initial Guarantee Period of five years and the five-year Treasury Rate for that
duration is 4.50%. Assume that at the end of three years, you make a partial
withdrawal. If, at that later time, the current five-year Treasury Rate is
4.20%, then the Market Value Adjustment will be positive, which will result in
an increase in the amount payable to you. Similarly, if the current five-year
Treasury Rate is 4.80%, then the Market Value Adjustment will be negative, which
will result in a decrease in the amount payable to you.
Dollar Cost Averaging Fixed Account Option. You may also allocate Purchase
Payments to the Dollar Cost Averaging Fixed Account Option. We will credit
interest to Purchase Payments allocated to this option for up to one year at the
current rate that we declare when you make the allocation. The effective annual
rate will never be less than 3%. You may not transfer funds to this option from
the Subaccounts or the Guaranteed Maturity Fixed Account Option. We will follow
your instructions in transferring amounts from this option to the Subaccounts or
the Guaranteed Maturity Fixed Account Option on a monthly basis only, as
described in "Automatic Dollar Cost Averaging Program" on page [ ] of this
prospectus.
ANNUITY BENEFITS
Annuity Date. You may select the Annuity Date, which is the date on which
annuity payments are to begin, in your application. The Annuity Date must always
be the business day immediately following the tenth day of a calendar month.
The Annuity Date may be no later than the Latest Annuity Date. As a
general rule, the Latest Annuity Date is the later of the 10th Contract
Anniversary or the Annuitant's 90th birthday. If your Contract was issued
pursuant to a Qualified Plan, however, the Tax Code generally requires you to
begin to take at least a minimum distribution by the later of:
o the year of your separation from service; or
o April 1 of the calendar year following the calendar year in which you
attain age 70 1/2.
If your Contract is issued pursuant to Section 408 of the Tax Code
(traditional IRAs), you must begin taking minimum distributions by April 1 of
the calendar year following the calendar year in which you reach age 70 1/2. No
minimum distributions are required by the Tax Code for Contracts issued pursuant
to Section 408A (Roth IRAs).
If you are in a Qualified Plan, we may require you to annuitize by the
date required by the Tax Code, unless you show us that you are meeting the
minimum distribution requirements in some other way.
If you do not select an Annuity Date, the Latest Annuity Date will
automatically become the Annuity Date. You may change the Annuity Date by
writing to us at the address given on the first page of the prospectus.
Annuity Options. You may elect an Annuity Option at any time before the Annuity
Date. As part of your election, you may choose the length of the applicable
guaranteed payment period within the limits available for your chosen Option. If
you do not select an Annuity Option, we will pay monthly annuity payments in
accordance with the applicable default Option. The default Options are:
o Option A with 10 years (120 months) guaranteed, if you have designated
only one Annuitant; and
o Option B with 10 years (120 months) guaranteed, if you have designated
joint Annuitants.
You may freely change your choice of Annuity Option, as long as you
request the change at least thirty days before the Annuity Date.
Three Annuity Options are generally available under the Contract. Each
is available in the form of:
o a Fixed Annuity;
o a Variable Annuity; or
o a combination of both Fixed and Variable Annuity.
The three Annuity Options are:
Option A, Life Annuity with Payments Guaranteed for 5 to 20 Years. We make
periodic payments at least as long as the Annuitant lives. If the Annuitant dies
before all of the guaranteed payments have been made, we will pay the remaining
guaranteed payments to the Beneficiary.
Option B, Joint and Survivor Annuity, with Payments Guaranteed for 5 to 20
Years. We make periodic payments at least as long as either the Annuitant or the
joint Annuitant is alive. If both the Annuitant and the Joint Annuitant die
before all of the guaranteed payments have been made, we will pay the remaining
guaranteed payments to the Beneficiary.
Option C, Payments for a Specified Period Certain of 5 Years to 30 Years. We
make periodic payments for the period you have chosen. If the Annuitant dies
before all of the guaranteed payments have been made, we will pay the remaining
guaranteed payments to the Beneficiary. If you elect this option and request
Variable Annuity payments, you may at any time before the period expires request
a lump sum payment. If you elected Variable Annuity payments, the lump sum
payment will depend on:
o the investment results of the Subaccounts you have selected,
o the Contract Value at the time you elected annuitization,
o the length of the remaining period for which the payee would be
entitled to payments.
No lump sum payment is available if you request Fixed Annuity payments.
If you purchased your Contract under a retirement plan, you may have a
more limited selection of Annuity Options to choose from. You should consult
your Plan documents to see what is available.
You may not "annuitize" your Contract for a lump sum payment. Instead,
before the Annuity Date you may surrender your Contract for a lump sum. As
described on page [ ], however, we will increase or decrease your surrender
proceeds by any applicable Market Value Adjustment.
Other Options. We may have other Annuity Options available. You may obtain
information about them by writing or calling us.
If your Contract is issued under Sections 401, 403(b), 408 or 408A of
the Tax Code, we will only make payments to you and/or your spouse.
Annuity Payments: General. On the Annuity Date, we will apply the Annuitized
Value of your Contract to the Annuity Option you have chosen. Your annuity
payments may consist of Variable Annuity payments or Fixed Annuity payments or a
combination of the two. We will determine the amount of your annuity payments as
described in "Variable Annuity Payments" and "Fixed Annuity Payments" on page [
].
You must notify us in writing at least 30 days before the Annuity Date
how you wish to allocate your Annuitized Value between Variable Annuity and
Fixed Annuity payments. You must apply at least the Contract Value in the Fixed
Account on the Annuity Date to Fixed Annuity payments. If you wish to apply any
portion of your Fixed Account balance to your Variable Annuity payments, you
should plan ahead and transfer that amount to the Subaccounts prior to the
Annuity Date. If you do not tell us how to allocate your Contract Value among
Fixed and Variable Annuity payments, we will apply your Contract Value in the
Separate Account to Variable Annuity payments and your Contract Value in the
Fixed Account to Fixed Annuity payments.
Annuity payments begin on the Annuity Date. We make subsequent annuity
payments on the tenth of the month or, if the NYSE is closed on that day, the
next day on which the NYSE is open for business.
Annuity payments will be made in monthly, quarterly, semi-annual or
annual installments as you select. If the amount available to apply under an
Annuity Option is less than $5,000, however, and state law permits, we may pay
you a lump sum instead of the periodic payments you have chosen. In addition, if
the first annuity payment would be less than $50, and state law permits us, we
may reduce the frequency of payments so that the initial payment will be at
least $50.
We may defer for up to 15 days the payment of any amount attributable
to a Purchase Payment made by check to allow the check reasonable time to clear.
You may not withdraw Contract Value during the Annuity Period, if we
are making payments to you under any Annuity Option, such as Option A or B
above, involving payment to you for life or any combination of payments for life
and minimum guaranteed period for a predetermined number of years.
Variable Annuity Payments. One basic objective of the Contract is to provide
Variable Annuity Payments which will to some degree respond to changes in the
economic environment. The amount of your Variable Annuity Payments will depend
upon the investment results of the Subaccounts you have selected, any premium
taxes, the age and sex of the Annuitant, and the Annuity Option chosen. We
guarantee that the Payments will not be affected by (1) actual mortality
experience and (2) the amount of our administration expenses.
We cannot predict the total amount of your Variable Annuity payments.
The Variable Annuity payments may be more or less than your total Purchase
Payments because (a) Variable Annuity payments vary with the investment results
of the underlying Portfolios; and (b) Annuitants may die before their actuarial
life expectancy is achieved.
The length of any guaranteed payment period under your selected Annuity
Option will affect the dollar amounts of each Variable Annuity payment. As a
general rule, longer guarantee periods result in lower periodic payments, all
other things being equal. For example, if a life Annuity Option with no minimum
guaranteed payment period is chosen, the Variable Annuity payments will be
greater than Variable Annuity payments under an Annuity Option for a minimum
specified period and guaranteed thereafter for life.
The investment results of the Subaccounts to which you have allocated
your Contract Value will also affect the amount of your periodic payment. In
calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3 1/2%. If the actual net
investment return is less than the assumed investment rate, then the dollar
amount of the Variable Annuity payments will decrease. The dollar amount of the
Variable Annuity payments will stay level if the net investment return equals
the assumed investment rate and the dollar amount of the Variable Annuity
payments will increase if the net investment return exceeds the assumed
investment rate. You should consult the Statement of Additional Information for
more detailed information as to how we determine Variable Annuity Payments.
Fixed Annuity Payments. You may choose to apply a portion of your Annuitized
Value to provide Fixed Annuity payments. We determine the Fixed Annuity payment
amount by applying the applicable Annuitized Value to the Annuity Option you
have selected.
As a general rule, subsequent Fixed Annuity payments will be equal in
amount to the initial payment. However, as described in "Transfers During
Annuity Period" below, after the Annuity Date, you will have a limited ability
to increase the amount of your Fixed Annuity payments by making transfers from
the Subaccounts.
We may defer making Fixed Annuity payments for a period of up to six
months or whatever shorter time state law may require. During the deferral
period, we credit interest at a rate at least as high as state law requires.
Transfers During Annuity Period. During the Annuity Period, you will have a
limited ability to make transfers among the Subaccounts so as to change the
relative weighting of the Subaccounts on which your Variable Annuity payments
will be based. In addition, you will have a limited ability to make transfers
from the Subaccounts to increase the proportion of your annuity payments
consisting of Fixed Annuity payments. You may not, however, convert any portion
of your right to receive Fixed Annuity payments into Variable Annuity payments.
You may not make any transfers for the first six months after the
Annuity Date. Thereafter, you may make transfers among the Subaccounts or make
transfers from the Subaccounts to increase your Fixed Annuity payments. Your
transfers must be at least six months apart.
Death Benefit During Annuity Period. If any Contract Owner dies after the
Annuity Date, the successor Contract Owner will receive any guaranteed annuity
payments scheduled to continue. If the successor owner dies before all of the
guaranteed payments have been made, we will continue the guaranteed payments to
the Beneficiary(ies).After annuity payments begin, upon the death of the
Annuitant and any Joint Annuitant, we will make any remaining guaranteed
payments to the Beneficiary. The amount and number of these guaranteed payments
will depend on the Annuity Option in effect at the time of the Annuitant's
death. After the Annuitant's death, any remaining guaranteed payments will be
distributed at least as rapidly as under the method of distribution in effect at
the Annuitant's death.
Certain Employee Benefit Plans. In some states, the Contracts offered by this
prospectus contain life annuity tables that provide for different benefit
payments to men and women of the same age. In certain employment-related
situations, however, the U.S. Supreme Court's decision in Arizona Governing
Committee v. Norris requires employers to use the same annuity tables for men
and women. Accordingly, if the Contract is to be used in connection with an
employment-related retirement or benefit plan and we do not offer unisex annuity
tables in your state, you should consult with legal counsel as to whether the
purchase of a Contract is appropriate under Norris.
OTHER CONTRACT BENEFITS
Death Benefit: General. We will pay a distribution on death, if:
(1) the Contract is in force;
(2) annuity payments have not begun; and
(3) either:
(a) any Owner dies; or
(b) the Annuitant dies, and the Owner is a non-living person.
Due Proof of Death.
A complete request for settlement of the death proceeds must be
submitted before the Annuity Date. A complete request must include "Due Proof of
Death". We will accept the following documentation as Due Proof of Death:
o a certified original copy of the Death Certificate;
o a certified copy of a court decree as to the finding of death; or
o a written statement of a medical doctor who attended the deceased at the
time of death.
In addition, in our discretion we may accept other types of proof.
Death Proceeds.
If we receive a complete request for settlement of the Death Proceeds within 180
days of the date of your death, the Death Proceeds are equal to the Death
Benefit as described. Otherwise, the Death Proceeds are equal to the greater of
the Contract Value or the Surrender Value. We reserve the right to extend, on a
nondiscriminatory basis, the 180-day period in which the Death Proceeds will
equal the Death Benefit as described. This right applies only to the amount
payable as Death Proceeds and in no way restricts when the claim may be filed.
Death Benefit Amount.
The Death Benefit under the Contract is the greatest of the following:
(1) the total Purchase Payments, less a withdrawal adjustment for any prior
partial withdrawals;
(2) the Contract Value on the date as of which we calculate the Death Benefit;
(3) the Surrender Value; or
(4) the highest Contract Value on any Contract Anniversary, after being
increased by the total Purchase Payments since that Contract Anniversary
and reduced by a withdrawal adjustment for any partial withdrawals since
that Contract Anniversary.
In relation to (1) and (4) above, the Death Benefit will be
recalculated for purchase payments, withdrawals, and on contract anniversaries
until the oldest owner, or the annuitant if the owner is not a living
individual, attains age 85. After age 85, we will recalculate (1) and (4) above
only to reflect additional purchase payments and withdrawals.
The withdrawal adjustment for the Death Benefit will equal (a) divided
by (b), with the result multiplied by (c), where:
(a) = the withdrawal amount;
(b) = the Contract Value immediately before the withdrawal; and
(c) = the value of the applicable Death Benefit immediately before the
withdrawal.
Death Benefit Payments
1. If your spouse is the sole beneficiary:
a. Your spouse may elect to receive the Death Proceeds in a lump sum; or
b. Your spouse may elect to receive the Death Proceeds paid out under one
of the annuity options, subject to the following conditions: The
Annuity Date must be within one year of your date of death. Annuity
payments must be payable:
i. over the life of your spouse; or
ii. for a guaranteed number of payments from 5 to 30 years but not to
exceed the life expectancy of your spouse; or
iii. over the life of your spouse with a guaranteed number of payments
from 5 to 30 years but not to exceed the life expectancy of your
spouse.
c. If your spouse chooses to continue the Contract, or does not elect one
of these options, then the Contract will continue in the Accumulation
Period as if the death had not occurred. If the Contract is continued
in the Accumulation Period, the following conditions apply:
Unless otherwise instructed by the continuing spouse, the excess, if
any, of the Death Proceeds over the Contract Value will be allocated to
the Subaccounts. This excess will be allocated in proportion to your
Contract Value in those Subaccounts as of the end of the Valuation
Period during which we receive the complete request for settlement of
the Death Proceeds, except that any portion of this excess attributable
to the fixed account options will be allocated to the Money Market
Subaccount. Within 30 days of the date the Contract is continued, your
surviving spouse may choose one of the following transfer alternatives
without incurring a transfer fee:
i. transfer all or a portion of the excess among the Subaccounts;
ii. transfer all or a portion of the excess into the Guaranteed
Maturity Fixed Account and begin a new Guarantee Period; or
iii. transfer all or a portion of the excess into a combination of
Subaccounts and the Guaranteed Maturity Fixed Account.
Any such transfer does not count as the free transfer allowed each
calendar month and is subject to any minimum allocation amount
specified in your contract.
The surviving spouse may make a single withdrawal of any amount within
one year of the date of your death without incurring a Market Value
Adjustment.
Prior to the annuity date, the death benefit of the continued Contract
will be as defined in the Death Benefit provision.
Only one spousal continuation is allowed under this Contract.
If there is no Annuitant at that time, the new Annuitant will be the
surviving spouse.
2. If the Beneficiary is not your spouse but is a living person:
a. The Beneficiary may elect to receive the Death Proceeds in a lump sum;
or
b. The Beneficiary may elect to receive the Death Proceeds paid out under
one of the Annuity Options, subject to the following conditions:
The Annuity Date must be within one year of your date of death. Annuity
payments must be payable:
i. over the life of the Beneficiary; or
ii. for a guaranteed number of payments from 5 to 30 years but not to
exceed the life expectancy of the Beneficiary; or
iii. over the life of the Beneficiary with a guaranteed number of
payments from 5 to 30 years but not to exceed the life expectancy
of the Beneficiary.
c. If the Beneficiary does not elect one of the options above, then the
Beneficiary must receive the Contract Value payable within 5 years of
your date of death. We will determine the Death Proceeds as of the
date we receive the complete request for settlement of the Death
Proceeds. Unless otherwise instructed by the Beneficiary, the excess,
if any, of the Death Proceeds over the Contract Value will be
allocated to the Money Market Subaccount and the Contract Value will
be adjusted accordingly. The Beneficiary may exercise all rights as
set forth in Transfer During the Accumulation Period on page [ ] and
Transfer Fees on page [ ] during this 5 year period.
The Beneficiary may not pay additional purchase payments into the
contract under this election.
We reserve the right to offer additional options upon death of the
Contract Owner.
If the Beneficiary dies before the complete liquidation of the Contract Value,
then the Beneficiary's named Beneficiary(ies) will receive the greater of the
Surrender Value or the remaining Contract Value. This amount must be liquidated
as a lump sum within 5 years of the date of the original Contract Owner's death.
3. If the Beneficiary is a corporation or other type of non-living person:
a. The Beneficiary may elect to receive the Death Proceeds in a lump sum;
or
b. If the Beneficiary does not elect to receive the option above, then
the Beneficiary must receive the Contract Value payable within 5 years
of your date of death. We will determine the Death Proceeds as of the
date we receive the complete request for settlement of the Death
Proceeds. Unless otherwise instructed by the Beneficiary, the excess,
if any, of the Death Proceeds over the Contract Value will be
allocated to the Money Market Subaccount and the Contract Value will
be adjusted accordingly. The Beneficiary may exercise all rights as
set forth in Transfer During the Accumulation Period on page [ ] and
Transfer Fees on page [ ] during this 5-year period.
The Beneficiary may not pay additional purchase payments into the
contract under this election.
We reserve the right to offer additional options upon the death of the
Contract Owner.
If any Beneficiary is a non-living person, all Beneficiaries will be
considered to be non-living persons for the above purposes.
Under any of these options, all contract rights, subject to any restrictions
previously placed upon the Beneficiary, are available to the Beneficiary from
the date of your death to the date on which the Death Proceeds are paid.
Different rules may apply to Contracts issued in connection with
Qualified Plans.
Beneficiary. You name the Beneficiary. You may name a Beneficiary in the
application. You may also name one or more contingent Beneficiaries who are
entitled to receive benefits under the Contract if all primary Beneficiaries are
deceased at the time an Contract Owner, or Annuitant if the Contract Owner is
not a living person, dies. You may change the Beneficiary or add additional
Beneficiaries at any time before the Annuity Date. We will provide a form to be
signed and filed with us.
Your changes in Beneficiary take effect when we accept them, effective
as of the date you signed the form. Until we accept your change instructions, we
are entitled to rely on your most recent instructions in our files. We are not
liable for making a payment to a Beneficiary shown in our files or treating that
person in any other respect as the Beneficiary, prior to accepting a change.
Accordingly, if you wish to change your beneficiary, you should deliver your
instructions to us promptly.
If you did not name a Beneficiary or if the named Beneficiary is no
longer living, the Beneficiary will be:
o your spouse if he or she is still alive; or, if he or she is no longer
alive,
o your surviving children equally; or if you have no surviving children,
o your estate.
Unless you have provided directions to the contrary, the Beneficiaries will take
equal shares. If there is more than one Beneficiary in a class and one of the
Beneficiaries predeceases the Contract Owner or Annuitant, the remaining
Beneficiaries in that class will divide the deceased Beneficiary's share in
proportion to the original shares of the remaining Beneficiaries. If more than
one beneficiary shares in the Death Proceeds, each Beneficiary will be treated
as a separate and independent owner of his or her respective share. Each
Beneficiary will exercise all rights related to his or her share of the Death
Proceeds, including the sole right to select a payout option, subject to any
restrictions previously placed upon the Beneficiary. Each Beneficiary may
designate a Beneficiary(ies) for his or her respective share, but that
designated Beneficiary(ies) will be restricted to the payout option chosen by
the original Beneficiary.
If there is more than one Beneficiary and one of the Beneficiaries is a
corporation or other type of non-living person, all Beneficiaries will be
considered to be non-living persons for the above purposes. You may specify that
the Death Benefit be paid under a specific Income Plan by submitting a written
request to our Service Center. If you so request, your Beneficiary may not
change to a different Income Plan or lump sum. Once we accept the written
request, the change or restriction will take effect as of the date you signed
the request.
Different rules may apply to Contracts issued in connection with
Qualified Plans.
Contract Loans for 401(a) and 403(b) Contracts. Subject to the restrictions
described below, we will make loans to the Owner of a Contract used in
connection with a Tax Sheltered Annuity Plan ("TSA Plan") under Section 403(b)
of the Tax Code, or an Owner of a Contract purchased by a defined contribution
plan qualified under Section 401(a) of the Tax Code (a "401 Plan") and issued
under our prototype document. If the Contract is owned by a 401 Plan that is not
issued under our prototype, you should contact the plan trustee to determine the
availability of loans under the 401 Plan. Loans are not available under
Non-Qualified Contracts. We will only make loans after the free look period and
before annuitization. All loans are subject to the terms of the Contract, the
relevant Plan, and the Tax Code, which impose restrictions on loans.
We will not make a loan to you if the total of the requested loan and
your unpaid outstanding loans will be greater than the Surrender Value of your
Contract on the date of the loan. In addition, we will not make a loan to you if
the total of the requested loan and all of the plan participant's Contract loans
under TSA Plans and 401 Plans is more than the lesser of (a) or (b) where:
(a) equals $50,000 minus the excess of the highest outstanding loan
balance during the prior 12 months over the current outstanding loan balance;
and
(b) equals the greater of $10,000 or 1/2 of the Surrender Value.
The minimum loan amount is $1,000.
To request a Contract loan, write to us at the address given on the
first page of the prospectus. You alone are responsible for ensuring that your
loan and repayments comply with tax requirements. Loans made before the Annuity
Date are generally treated as distributions under the Contract, and may be
subject to withholding and tax penalties for early distributions. Some of these
requirements are stated in Section 72 of the Tax Code and Title 1 of ERISA.
Please seek advice from your plan administrator or tax advisor.
When we make a loan, we will transfer an amount equal to the loan
amount from the Separate Account and/or the Fixed Account to the Loan Account as
collateral for the loan. We will transfer to the Loan Account amounts from the
Separate Account in proportion to the assets in each Subaccount. If your loan
amount is greater than your Contract Value in the Subaccounts, we will transfer
the remaining required collateral from the Guaranteed Maturity Fixed Account
Options. If your loan amount is greater than your contract value in the
Subaccounts and the Guaranteed Maturity Fixed Account Options, we will transfer
the remaining required collateral from the Dollar Cost Averaging Fixed Account
Option.
We may apply a Market Value Adjustment to a transfer from the Fixed
Account to the Loan Account. If we do, we will increase or decrease the amount
remaining in the Fixed Account by the amount of the Market Value Adjustment, so
that the net amount transferred to the Loan Account will equal the desired loan
amount.
We will credit interest to the amounts in the Loan Account. The annual
interest rate credited to the Loan Account will be the greater of: (a) 3%; or
(b) the loan interest rate minus 2.25%. The value of the amounts in the Loan
Account are not affected by the changes in the value of the Subaccounts.
When you take out a loan, we will set the loan interest rate. That rate
will apply to your loan until it is repaid. From time to time, we may change the
loan interest rate applicable to new loans. We also reserve the right to change
the terms of new loans.
We will subtract the outstanding Contract loan balance, including
accrued but unpaid interest, from:
(1) the Death Benefit;
(2) surrender proceeds;
(3) the amount available for partial withdrawal; and
(4) the amount applied on the Annuity Date to provide annuity payments.
Usually you must repay a Contract loan within five years of the date
the loan is made. Scheduled payments must be level, amortized over the repayment
period, and made at least quarterly. We may permit a repayment period of 15 or
30 years if the loan proceeds are used to acquire your principal residence. We
may also permit other repayment periods.
You must mark your loan repayments as such. We will assume that any
payment received from you is a Purchase Payment, unless you tell us otherwise.
If you do not make a loan payment when due, we will continue to charge
interest on your loan. We also will declare the entire loan in default. We will
subtract the defaulted loan balance plus accrued interest from any future
distribution under the Contract and keep it in payment of your loan. Any
defaulted amount plus interest will be treated as a distribution for tax
purposes (as permitted by law). As a result, you may be required to pay taxes on
the defaulted amount, incur the early withdrawal tax penalty, and be subject to
mandatory 20% federal withholding. We will capitalize interest on a loan in
default.
If the total loan balance exceeds the Surrender Value, we will mail
written notice to your last known address. The notice will state the amount
needed to maintain the Contract in force. If we do not receive payment of this
amount within 31 days after we mail this notice, we will terminate your
Contract.
We may defer making any loan for 6 months after you ask us for a loan,
unless the loan is to pay a premium to us.
Withdrawals (Redemptions). Except as explained below, you may redeem a Contract
for all or a portion of its Contract Value before the Annuity Date. Withdrawals
from the Fixed Account may be increased or decreased by a Market Value
Adjustment, as described in "Market Value Adjustment" on page [ ].
In general, you must withdraw at least $50 at a time. You may also
withdraw a lesser amount if you are withdrawing your entire interest in a
Subaccount. If your request for a partial withdrawal would reduce the Contract
Value to less than $500, we may treat it as a request for a withdrawal of your
entire Contract Value, as described in "Minimum Contract Value" on page [ ].
Your Contract will terminate if you withdraw all of your Contract Value.
We may be required to withhold 20% of withdrawals and distributions
from Contracts issued in connection with certain Qualified Plans, as described
on page [ ]. Withdrawals also may be subject to a 10% penalty tax, as described
on page [ ].
To make a withdrawal, you must send us a written withdrawal request or
systematic withdrawal program enrollment form. You may obtain the required forms
from us at the address and phone number given on the first page of this
prospectus.
For partial withdrawals, you may allocate the amount among the
Subaccounts and the Fixed Accounts. If we do not receive allocation instructions
from you, we usually will allocate the partial withdrawal proportionately among
the Subaccounts and the Guaranteed Maturity Fixed Account Options based upon the
balance of the Subaccounts and the Guaranteed Maturity Fixed Account Options,
with any remainder being distributed from the Dollar Cost Averaging Fixed
Account Option. You may not make a partial withdrawal from the Fixed Account in
an amount greater than the total amount of the partial withdrawal multiplied by
the ratio of the value of the Fixed Account to the Contract Value immediately
before the partial withdrawal.
If you request a total withdrawal, you must send us your Contract. The
Surrender Value will equal the Contract Value adjusted by any applicable Market
Value Adjustment. We also will deduct a contract maintenance charge of $35,
unless we have waived the contract maintenance charge on your Contract as
described on page [ ]. We determine the Surrender Value based on the Contract
Value next computed after we receive a properly completed surrender request. We
will usually pay the Surrender Value within seven days after the day we receive
a completed request form. However, we may suspend the right of withdrawal from
the Separate Account or delay payment for withdrawals for more than seven days
in the following circumstances:
(1) whenever the New York Stock Exchange ("NYSE") is closed (other than
customary weekend and holiday closings);
(2) when trading on the NYSE is restricted or an emergency exists, as
determined by the SEC, so that disposal of the Separate Account's
investments or determination of Accumulation Unit Values is not reasonably
practicable; or
(3) at any other time permitted by the SEC for your protection.
In addition, we may delay payment of the Surrender Value in the Fixed
Account for up to 6 months or a shorter period if required by law. If we delay
payment from the Fixed Account for more than 30 days, we will pay interest as
required by applicable law.
You may withdraw amounts attributable to contributions made pursuant to
a salary reduction agreement (in accordance with Section 403(b)(11) of the Tax
Code) only in the following circumstances:
(1) when you attain age 59 1/2;
(2) when you terminate your employment with the plan sponsor;
(3) upon your death;
(4) upon your disability as defined in Section 72(m)(7) of the Tax Code; or
(5) in the case of hardship.
If you seek a hardship withdrawal, you may only withdraw amounts
attributable to your Purchase Payments; you may not withdraw any earnings. These
limitations on withdrawals apply to:
(1) salary reduction contributions made after December 31, 1988;
(2) income attributable to such contributions; and
(3) income attributable to amounts held as of December 31, 1988.
The limitations on withdrawals do not affect transfers between certain
Qualified Plans. Additional restrictions and limitations may apply to
distributions from any Qualified Plan. Tax penalties may also apply. You should
seek tax advice regarding any withdrawals or distributions from Qualified Plans.
Systematic Withdrawal Program. If your Contract was issued in connection with a
Non-Qualified annuity or IRA, you may participate in our Systematic Withdrawal
Program. You must complete an enrollment form and send it to us. You must
complete the withholding election section of the enrollment form before the
systematic withdrawals will begin. You may choose withdrawal payments of a flat
dollar amount, earnings, or a percentage of Purchase Payments. You may choose to
receive systematic withdrawal payments on a monthly, quarterly, semi-annual, or
annual basis. Systematic withdrawals will be deducted from your Subaccount and
Fixed Account balances, excluding the Dollar Cost Averaging Fixed Account, on a
pro rata basis.
Depending on fluctuations in the net asset value of the Subaccounts and
the value of the Fixed Account, systematic withdrawals may reduce or even
exhaust the Contract Value. The minimum amount of each systematic withdrawal is
$50.
We will make systematic withdrawal payments to you or your designated
payee. We may modify or suspend the Systematic Withdrawal Program and charge a
processing fee for the service. If we modify or suspend the Systematic
Withdrawal Program, existing systematic withdrawal payments will not be
affected.
ERISA Plans. A married participant may need spousal consent to receive a
distribution from a Contract issued in connection with a Qualified Plan or a
Non-Qualified Plan covered by to Title 1 of ERISA. You should consult an
adviser.
Minimum Contract Value. If as a result of withdrawals your Contract Value would
be less than $5,000 and you have not made any Purchase Payments during the
previous three full calendar years, we may terminate your Contract and
distribute its Surrender Value to you. Before we do this, we will give you 60
days notice. We will not terminate your Contract on this ground if the Contract
Value has fallen below $500 due to either a decline in Accumulation Unit Value
or the imposition of fees and charges. In addition, in some states we are not
permitted to terminate Contracts on this ground. Different rules may apply to
Contracts issued in connection with Qualified Plans.
CONTRACT CHARGES
We assess charges under the Contract in two ways:
(1) as deductions from Contract Value for contract maintenance charges
and, if applicable, for premium taxes; and
(2) as charges against the assets of the Separate Account for
administrative expenses and for the assumption of mortality and
expense risks.
In addition, certain deductions are made from the assets of the
Portfolios for investment management fees and expenses. Those fees and expenses
are summarized in the Fee Tables on page [ ], and described more fully in the
Prospectuses and Statements of Additional Information for the Portfolios.
Mortality and Expense Risk Charge. We deduct a mortality and expense risk charge
from each Subaccount during each Valuation Period. The mortality and expense
risk charge is equal, on an annual basis, to 1.30% of the average net asset
value of each Subaccount. The mortality risks arise from our contractual
obligations:
(1) to make annuity payments after the Annuity Date for the life of the
Annuitant(s); and
(2) to provide the Death Benefit prior to the Annuity Date. A detailed
explanation of the Death Benefit may be found beginning on page [ ].
The expense risk is that it may cost us more to administer the
Contracts and the Separate Account than we receive from the contract maintenance
charge and the administrative expense charge. We guarantee the mortality and
expense risk charge and we cannot increase it. We assess the mortality and
expense risk charge during both the Accumulation Period and the Annuity Period.
Administrative Charges.
Contract Maintenance Charge. We charge an annual contract maintenance charge of
$35 on your Contract. The amount of this charge is guaranteed not to increase.
This charge reimburses us for our expenses incurred in maintaining your
Contract.
Before the Annuity Date, we assess the contract maintenance charge on
each Contract Anniversary. To obtain payment of this charge, on a pro rata basis
we will allocate this charge among the Subaccounts to which you have allocated
your Contract Value, and redeem Accumulation Units accordingly. We will waive
this charge if you pay more than $50,000 in Purchase Payments or if you allocate
all of your Contract Value to the Fixed Account. If you surrender your Contract,
we will deduct the full $35 charge as of the date of surrender, unless your
Contract qualifies for a waiver.
After the Annuity Date, we will subtract this charge in equal parts
from each of your annuity payments. We will waive this charge if on the Annuity
Date your Contract Value is $50,000 or more or if all of your annuity payments
are Fixed Annuity payments.
Administrative Expense Charge. We deduct an administrative expense charge from
each Subaccount during each Valuation Period. This charge is equal, on an annual
basis, to 0.10% of the average net asset value of the Subaccounts. This charge
is designed to compensate us for the cost of administering the Contracts and the
Separate Account. The administrative expense charge is assessed during both the
Accumulation Period and the Annuity Period.
Transfer Fee. We currently are waiving the transfer fee. The Contract, however,
permits us to charge a transfer fee of $10 on the second and each subsequent
transaction in each calendar month in which transfer(s) are effected between
Subaccount(s) and/or the Fixed Account. We will notify you if we begin to charge
this fee. We will not charge a transfer fee on transfers that are part of a
Dollar Cost Averaging or Portfolio Rebalancing program.
The transfer fee will be deducted from Contract Value that remains in
the Subaccount(s) or Fixed Account from which the transfer was made. If that
amount is insufficient to pay the transfer fee, we will deduct the fee from the
transferred amount.
Premium Taxes. We will charge premium taxes or other state or local taxes
against the Contract Value, including Contract Value that results from amounts
transferred from existing policies (Section 1035 exchange) issued by us or other
insurance companies. Some states assess premium taxes when Purchase Payments are
made; others assess premium taxes when annuity payments begin. We will deduct
any applicable premium taxes upon full surrender, death, or annuitization.
Premium taxes generally range from 0% to 3.5%.
Deduction for Separate Account Income Taxes. We are not currently maintaining a
provision for taxes. In the future, however, we may establish a provision for
taxes if we determine, in our sole discretion, that we will incur a tax as a
result of the operation of the Separate Account. We will deduct for any taxes we
incur as a result of the operation of the Separate Account, whether or not we
previously made a provision for taxes and whether or not it was sufficient. Our
status under the Tax Code is briefly described in "Federal Tax Matters" on page
[ ].
Other Expenses. You indirectly bear the charges and expenses of the Portfolios
whose shares are held by the Subaccounts to which you allocate your Contract
Value. For a summary of current estimates of those charges and expenses, see
page [ ]. For more detailed information about those charges and expenses, please
refer to the prospectuses for the appropriate Portfolios. We may receive
compensation from the investment advisers or administrators of the Portfolios in
connection with administrative service and cost savings experienced by the
investment advisers or administrators.
FEDERAL TAX MATTERS
Introduction
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. LINCOLN
BENEFIT MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF LINCOLN BENEFIT LIFE COMPANY
Lincoln Benefit is taxed as a life insurance company under Part I of Subchapter
L of the Internal Revenue Code. Since the Separate Account is not an entity
separate from Lincoln Benefit, and its operations form a part of Lincoln
Benefit, it will not be taxed separately as a "Regulated Investment Company"
under Subchapter M of the Code. Investment income and realized capital gains of
the Separate Account are automatically applied to increase reserves under the
Contract. Under existing federal income tax law, Lincoln Benefit believes that
the Separate Account investment income and capital gains will not be taxed to
the extent that such income and gains are applied to increase the reserves under
the Contract. Accordingly, Lincoln Benefit does not anticipate that it will
incur any federal income tax liability attributable to the Separate Account, and
therefore Lincoln Benefit does not intend to make provisions for any such taxes.
If Lincoln Benefit is taxed on investment income or capital gains of the
Separate Account, then Lincoln Benefit may impose a charge against the Separate
Account in order to make provision for such taxes.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL.
Generally, you are not taxed on increases in the Contract Value until a
distribution occurs. This rule applies only where:
1. the owner is a natural person,
2. the investments of the Separate Account are "adequately diversified"
according to Treasury Department regulations, and
3. Lincoln Benefit is considered the owner of the Separate Account assets
for federal income tax purposes.
NON-NATURAL OWNERS.
As a general rule, annuity contracts owned by non-natural persons such as
corporations, trusts, or other entities are not treated as annuity contracts for
federal income tax purposes. The income on such contracts does not enjoy tax
deferral and is taxed as ordinary income received or accrued by the owner during
the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE
There are several exceptions to the general rule that annuity contracts held by
a non-natural owner are not treated as annuity contracts for federal income tax
purposes. Contracts will generally be treated as held by a natural person if the
nominal owner is a trust or other entity which holds the Contract as agent for a
natural person. However, this special exception will not apply in the case of an
employer who is the nominal owner of an annuity contract under a non-qualified
deferred compensation arrangement for its employees. Other exceptions to the
non-natural owner rule are: (1) Contracts acquired by an estate of a decedent by
reason of the death of the decedent; (2) certain Qualified Contracts; (3)
Contracts purchased by employers upon the termination of certain qualified
plans; (4) certain Contracts used in connection with structured settlement
agreements, and (5) immediate annuity Contracts, purchased with a single
premium, when the annuity starting date is no later than a year from purchase of
the annuity and substantially equal periodic payments are made, not less
frequently than annually, during the annuity period.
DIVERSIFICATION REQUIREMENTS.
For a Contract to be treated as an annuity for federal income tax purposes, the
investments in the Separate Account must be "adequately diversified" consistent
with standards under Treasury Department regulations. If the investments in the
Separate Account are not adequately diversified, the Contract will not be
treated as an annuity contract for federal income tax purposes. As a result, the
income on the Contract will be taxed as ordinary income received or accrued by
the owner during the taxable year. Although Lincoln Benefit does not have
control over the Funds or their investments, we expect the Funds to meet the
diversification requirements.
OWNERSHIP TREATMENT.
The IRS has stated that a Contract Owner will be considered the owner of
Separate Account assets if he possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. At the time
the diversification regulations were issued, the Treasury Department announced
that the regulations do not provide guidance concerning circumstances in which
investor control of the Separate Account investments may cause a Contract Owner
to be treated as the owner of the Separate Account. The Treasury Department also
stated that future guidance would be issued regarding the extent that Owners
could direct sub-account investments without being treated as Owners of the
underlying assets of the Separate Account.
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that Contract Owners were not Owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among a broader selection of investment alternatives. Also, you
may be able to transfer among investment alternatives more frequently than in
such rulings. These differences could result in you being treated as the owner
of the Variable Account. If this occurs, income and gain from the Separate
Account assets would be includible in your gross income. Lincoln Benefit does
not know what standards will be set forth in any regulations or rulings which
the Treasury Department may issue. It is possible that future standards
announced by the Treasury Department could adversely affect the tax treatment of
your Contract. We reserve the right to modify the Contract as necessary to
attempt to prevent you from being considered the federal tax owner of the assets
of the Separate Account. However, we make no guarantee that such modification to
the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS
If you make a partial withdrawal under a non-Qualified Contract, amounts
received are taxable to the extent the Contract Value, without regard to
surrender charges, exceeds the investment in the Contract. The investment in the
Contract is the gross premium paid for the contract minus any amounts previously
received from the Contract if such amounts were properly excluded from your
gross income. If you make a full withdrawal under a non-Qualified Contract, the
amount received will be taxable only to the extent it exceeds the investment in
the Contract.
TAXATION OF ANNUITY PAYMENTS
Generally, the rule for income taxation of annuity payments received from a
nonqualified contract provides for the return of your investment in the Contract
in equal tax-free amounts over the payment period. The balance of each payment
received is taxable. For fixed annuity payments, the amount excluded from income
is determined by multiplying the payment by the ratio of the investment in the
Contract (adjusted for any refund feature or period certain) to the total
expected value of annuity payments for the term of the Contract. If you elect
variable annuity payments, the amount excluded from taxable income is determined
by dividing the investment in the Contract by the total number of expected
payments. The annuity payments will be fully taxable after the total amount of
the investment in the Contract is excluded using these ratios. The Federal tax
treatment of annuity payments is unclear in some respects. As a result, if the
IRS should provide further guidance, it is possible that the amount we calculate
and report to the IRS as taxable could be different. If you die, and annuity
payments cease before the total amount of the investment in the Contract is
recovered, the unrecovered amount will be allowed as a deduction for your last
taxable year.
DISTRIBUTION AT DEATH RULES
In order to be considered an annuity contract for federal income tax purposes,
the Contract must provide:
(1) if any Contract Owner dies on or after the Payout Start Date but
before the entire interest in the Contract has been distributed, the remaining
portion of such interest must be distributed at least as rapidly as under the
method of distribution being used as of the date of the Owner's death;
(2) if any Contract Owner dies prior to the Payout Start Date, the
entire interest in the Contract will be distributed within 5 years after the
date of the Owner's death. These requirements are satisfied if any portion of
the Contract Owner's interest that is payable to (or for the benefit of) a
designated Beneficiary is distributed over the life of such Beneficiary (or over
a period not extending beyond the life expectancy of the Beneficiary) and the
distributions begin within 1 year of the Owner's death. If the Contract Owner's
designated Beneficiary is the surviving spouse of the Owner, the Contract may be
continued with the surviving spouse as the new Contract Owner.
(3) if the Contract Owner is a non-natural person, then the Annuitant
will be treated as the Contract Owner for purposes of applying the distribution
at death rules. In addition, a change in the Annuitant on a Contract owned by a
non-natural person will be treated as the death of the Contract Owner.
TAXATION OF ANNUITY DEATH BENEFITS
Death Benefit amounts are included in income as follows:
1. if distributed in a lump sum, the amounts are taxed in the same manner
as a full withdrawal, or
2. if distributed under an Income Plan, the amounts are taxed in the same
manner as annuity payments.
PENALTY TAX ON PREMATURE DISTRIBUTIONS
A 10% penalty tax applies to the taxable amount of any premature distribution
from a non-Qualified Contract. The penalty tax generally applies to any
distribution made prior to the date you attain age 59 1/2. However, no penalty
tax is incurred on distributions:
1. made on or after the date the Contract Owner attains age 59 1/2,
2. made as a result of the Contract Owner's death or becoming totally
disabled,
3. made in substantially equal periodic payments over the Contract
Owner's life or life expectancy, or over the joint lives or joint life
expectancies of the Contract Owner and the Contract beneficiary,
4. made under an immediate annuity, or
5. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS
With respect to non-Qualified Contracts using substantially equal periodic
payments or immediate annuity payments as an exception to the penalty tax on
premature distributions, any additional withdrawal or other modification of the
payment stream would violate the requirement that payments must be substantially
equal. Failure to meet this requirement would mean that the income portion of
each payment received prior to the later of 5 years or the Contract Owner's
attaining age 59 1/2 would be subject to a 10% penalty tax unless another
exception to the penalty tax applied. The tax for the year of the modification
is increased by the penalty tax that would have been imposed without the
exception, plus interest for the years in which the exception was used. You
should consult a competent tax advisor prior to taking a withdrawal.
TAX FREE EXCHANGES UNDER IRC SECTION 1035
A 1035 exchange is a tax-free exchange of a non-Qualified life insurance
contract, endowment contract or annuity contract for a new non-Qualified annuity
contract. The Contract Owner(s) must be the same on the old and new contract.
Basis from the old contract carries over to the new contract so long as we
receive that information from the relinquishing company. If basis information is
never received, we will assume that all exchanged funds represent earnings and
will allocate no cost basis to them.
TAXATION OF OWNERSHIP CHANGES
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive as a loan under a Contract, and any assignment
or pledge (or agreement to assign or pledge) of the Contract Value is taxed as a
withdrawal of such amount or portion and may also incur the 10% penalty tax.
Currently we do not allow assignments.
AGGREGATION OF ANNUITY CONTRACTS
The Code requires that all non-qualified deferred annuity contracts issued by
Lincoln Benefit (or its affiliates) to the same Contract Owner during any
calendar year be aggregated and treated as one annuity contract for purposes of
determining the taxable amount of a distribution.
INCOME TAX WITHHOLDING
Generally, Lincoln Benefit is required to withhold federal income tax at a rate
of 10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold the required 10% of the taxable
amount. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Lincoln Benefit is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. In certain states, if there is federal withholding,
then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
TAX QUALIFIED CONTRACTS
The income on qualified plan and IRA investments is tax deferred, and the income
on variable annuities held by such plans does not receive any additional tax
deferral. You should review the annuity features, including all benefits and
expenses, prior to purchasing a variable annuity in a qualified plan or IRA.
Contracts may be used as investments with certain qualified plans such as:
- - Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
- - Roth IRAs under Section 408A of the Code;
- - Simplified Employee Pension Plans under Section 408(k) of the Code;
- - Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
- - Tax Sheltered Annuities under Section 403(b) of the Code;
- - Corporate and Self Employed Pension and Profit Sharing Plans under Sections
401 and 403; and
- - State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans under Section 457.
The Contract may be used with several types of qualified plans. Lincoln Benefit
reserves the right to limit the availability of the Contract for use with any of
the Qualified Plans listed above or to modify the Contract to conform with tax
requirements. The tax rules applicable to participants in such qualified plans
vary according to the type of plan and the terms and conditions of the plan
itself. Adverse tax consequences may result from certain transactions such as
excess contributions, premature distributions, and distributions that do not
conform to specified commencement and minimum distribution rules.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM A QUALIFIED CONTRACT
If you make a partial withdrawal under a Qualified Contract other than a Roth
IRA, the portion of the payment that bears the same ratio to the total payment
that the investment in the Contract (i.e., nondeductible IRA contributions,
after tax contributions to qualified plans) bears to the Contract Value, is
excluded from your income. We do not keep track of nondeductible contributions,
and all tax reporting of distributions from qualified contracts other than Roth
IRAs will indicate that the distribution is fully taxable.
"Qualified distributions" from Roth IRAs are not included in gross income.
"Qualified distributions" are any distributions made more than five taxable
years after the taxable year of the first contribution to any Roth IRA and which
are:
- - - made on or after the date the Contract Owner attains age 59 1/2,
- - - made to a beneficiary after the Contract Owner's death,
- - - attributable to the Contract Owner being disabled, or
- - - made for a first time home purchase (first time home purchases are subject
to a lifetime limit of $10,000).
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. All tax reporting of distributions from Roth
IRAs will indicate that the taxable amount is not determined.
REQUIRED MINIMUM DISTRIBUTIONS
Generally, qualified plans require minimum distributions upon reaching age 70
1/2. Failure to withdraw the required minimum distribution will result in a 50%
tax penalty on the shortfall not withdrawn from the contract. NOT ALL INCOME
PLANS OFFERED UNDER THIS ANNUITY CONTRACT SATISFY THE REQUIREMENTS FOR MINIMUM
DISTRIBUTIONS. BECAUSE THESE DISTRIBUTIONS ARE REQUIRED UNDER THE CODE AND THE
METHOD OF CALCULATION IS COMPLEX, PLEASE SEE A COMPETENT TAX ADVISOR.
THE DEATH BENEFIT AND QUALIFIED CONTRACTS
Pursuant to the Code and IRS regulations, an IRA may not invest in life
insurance contracts. However, an IRA (e.g., traditional IRA, Roth IRA, SEP IRA
and SIMPLE IRA) may provide a death benefit that equals the greater of the
purchase payments or the Contract Value. The Contract offers a death benefit
that in certain circumstances may exceed the greater of the purchase payments or
the Contract Value. It is possible that the Death Benefit could be viewed as
violating the prohibition on investment in life insurance contracts, with the
result that the Contract would not satisfy the requirements of an IRA.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM QUALIFIED CONTRACTS
A 10% penalty tax applies to the taxable amount of any premature distribution
from a Qualified Contract. The penalty tax generally applies to any distribution
made prior to the date you attain age 59 1/2. However, no penalty tax is
incurred on distributions:
1. made on or after the date the Contract Owner attains age 59 1/2,
2. made as a result of the Contract Owner's death or total disability,
3. made in substantially equal periodic payments over the Contract Owner's
life or life expectancy, or over the joint lives or joint life expectancies
of the Contract Owner and the Contract beneficiary,
4. made pursuant to an IRS levy,
5. made for certain medical expenses,
6. made to pay for health insurance premiums while unemployed (only applies
for IRAs),
7. made for qualified higher education expenses (only applies for IRAs), and
8. made for a first time home purchase (up to a $10,000 lifetime limit and
only applies for IRAs).
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty,
will be subject to a 25% penalty tax. You should consult a competent tax advisor
to determine how these exceptions may apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON QUALIFIED CONTRACTS
With respect to Qualified Contracts using substantially equal periodic payments
as an exception to the penalty tax on premature distributions, any additional
withdrawal or other modification of the payment stream would violate the
requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the taxpayer's attaining age 59 1/2 would be subject to
a 10% penalty tax unless another exception to the penalty tax applied. The tax
for the year of the modification is increased by the penalty tax that would have
been imposed without the exception, plus interest for the years in which the
exception was used. You should consult a competent tax advisor prior to taking a
withdrawal.
INCOME TAX WITHHOLDING ON QUALIFIED CONTRACTS
Generally, Lincoln Benefit is required to withhold federal income tax at a rate
of 10% from all non-annuitized distributions that are not considered "eligible
rollover distributions." The customer may elect out of withholding by completing
and signing a withholding election form. If no election is made, we will
automatically withhold the required 10% from the taxable amount. In certain
states, if there is federal withholding, then state withholding is also
mandatory. Lincoln Benefit is required to withhold federal income tax at a rate
of 20% on all "eligible rollover distributions" unless you elect to make a
"direct rollover" of such amounts to an IRA or eligible retirement plan.
Eligible rollover distributions generally include all distributions from
Qualified Contracts, excluding IRAs, with the exception of:
1. required minimum distributions, or
2. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
3. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
4. hardship distributions.
For all annuitized distributions that are not subject to the 20% withholding
requirement, Lincoln Benefit is required to withhold federal income tax using
the wage withholding rates from all annuitized distributions. The customer may
elect out of withholding by completing and signing a withholding election form.
If no election is made, we will automatically withhold using married with three
exemptions as the default. In certain states, if there is federal withholding,
then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity (IRA).
Individual Retirement Annuities are subject to limitations on the amount that
can be contributed and on the time when distributions may commence. Certain
distributions from other types of qualified plans may be "rolled over" on a
tax-deferred basis into an Individual Retirement Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES
Section 408A of the Code permits eligible individuals to make nondeductible
contributions to an individual retirement program known as a Roth Individual
Retirement Annuity. Roth Individual Retirement Annuities are subject to
limitations on the amount that can be contributed and on the time when
distributions may commence. Subject to certain limitations, a traditional
Individual Retirement Account or Annuity may be converted or "rolled over" to a
Roth Individual Retirement Annuity. The income portion of a conversion or
rollover distribution is taxable currently, but is exempted from the 10% penalty
tax on premature distributions.
SIMPLIFIED EMPLOYEE PENSION PLANS
Section 408(k) of the Code allows eligible employers to establish simplified
employee pension plans for their employees using individual retirement
annuities. Under these plans the employer may, within specified limits, make
deductible contributions on behalf of the employees to the individual retirement
annuities. Employers intending to use the Contract in connection with such plans
should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE PLANS)
Sections 408(p) and 401(k) of the Code allow eligible employers with 100 or
fewer employees to establish SIMPLE retirement plans for their employees. SIMPLE
plans may be structured as a SIMPLE retirement account using an IRA or as a
Section 401(k) qualified cash or deferred arrangement. In general, a SIMPLE plan
consists of a salary deferral program for eligible employees and matching or
nonelective contributions made by employers. Employers intending to use the
Contract in conjunction with SIMPLE plans should seek competent tax and legal
advice.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAs
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES
Section 403(b) of the Tax Code provides tax-deferred retirement savings plans
for employees of certain non-profit and educational organizations. Under Section
403(b), any contract used for a 403(b) plan must provide that distributions
attributable to salary reduction contributions made after 12/31/88, and all
earnings on salary reduction contributions, may be made only on or after the
date the employee:
- - - attains age 59 1/2,
- - - separates from service,
- - - dies,
- - - becomes disabled, or
- - - incurs a hardship (earnings on salary reduction contributions may not be
distributed on account of hardship).
These limitations do not apply to withdrawals where Lincoln Benefit is directed
to transfer some or all of the contract value to another 403(b) plan.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS
Sections 401(a) and 403(a) of the Code permit corporate employers to establish
various types of tax favored retirement plans for employees. Self-employed
individuals may establish tax favored retirement plans for themselves and their
employees. Such retirement plans (commonly referred to as "H.R.10" or "Keogh")
may permit the purchase of annuity contracts.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION DEFERRED COMPENSATION
PLANS
Section 457 of the Code permits employees of state and local governments and
tax-exempt organizations to defer a portion of their compensation without paying
current taxes. The employees must be participants in an eligible deferred
compensation plan. In eligible governmental plans, all assets and income must be
held in a trust/custodial account/annuity contract for the exclusive benefit of
the participants and their beneficiaries. To the extent the Contracts are used
in connection with a non-governmental eligible plan, employees are considered
general creditors of the employer and the employer as owner of the Contract has
the sole right to the proceeds of the Contract. Under eligible 457 plans,
contributions made for the benefit of the employees will not be includible in
the employees' gross income until distributed from the plan.
DESCRIPTION OF LINCOLN BENEFIT LIFE
COMPANY AND THE SEPARATE ACCOUNT
Lincoln Benefit Life Company. Lincoln Benefit is a stock life insurance company
organized under the laws of the state of Nebraska in 1938. Our legal domicile
and principal business address is 2940 South 84th Street, Lincoln, Nebraska.
Lincoln Benefit is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life" or "ALIC"), a stock life insurance company incorporated under
the laws of the State of Illinois. Allstate Life is a wholly owned subsidiary of
Allstate Insurance Company ("AIC"), a stock property-liability insurance company
incorporated under the laws of Illinois. All outstanding capital stock of
Allstate is owned by The Allstate Corporation ("Corporation").
We are authorized to conduct life insurance and annuity business in the
District of Columbia, Guam, U.S. Virgin Islands and all states except New York.
We intend to market the Contract everywhere we conduct variable annuity
business. The Contracts offered by this prospectus are issued by us and will be
funded in the Separate Account and/or the Fixed Account.
Under our reinsurance agreements with Allstate Life, substantially all
contract-related transactions are transferred to Allstate Life. Through our
reinsurance agreements with Allstate Life, substantially all of the assets
backing our reinsured liabilities are owned by Allstate Life. These assets
represent our general account and are invested and managed by Allstate Life.
Accordingly, the results of operations with respect to applications received and
contracts issued by Lincoln Benefit are not reflected in our consolidated
financial statements. The amounts reflected in our consolidated financial
statements relate only to the investment of those assets of Lincoln Benefit that
are not transferred to Allstate Life under the reinsurance agreements. While the
reinsurance agreements provide us with financial backing from Allstate Life, it
does not create a direct contractual relationship between Allstate Life and you.
Under the Company's reinsurance agreements with ALIC, the Company
reinsures all reserve liabilities with ALIC except for variable contracts. The
Company's variable contract assets and liabilities are held in
legally-segregated, unitized Separate Accounts and are retained by the Company.
However, the transactions related to such variable contracts such as premiums,
expenses and benefits are transferred to ALIC.
Lincoln Benefit is highly rated by independent agencies, including A.M.
Best, Moody's, and Standard & Poor's. These ratings are based on our reinsurance
agreement with Allstate Life, and reflect financial soundness and strong
operating performance. The ratings are not intended to reflect the financial
strength or investment experience of the Separate Account. We may from time to
time advertise these ratings in our sales literature.
Separate Account. Lincoln Benefit Life Variable Annuity Account was originally
established in 1992, as a segregated asset account of Lincoln Benefit. The
Separate Account meets the definition of a "separate account" under the federal
securities laws and is registered with the SEC as a unit investment trust under
the Investment Company Act of 1940. The SEC does not supervise the management of
the Separate Account or Lincoln Benefit.
We own the assets of the Separate Account, but we hold them separate
from our other assets. To the extent that these assets are attributable to the
Contract Value of the Contracts offered by this prospectus, these assets are not
chargeable with liabilities arising out of any other business we may conduct.
Income, gains, and losses, whether or not realized, from assets allocated to the
Separate Account are credited to or charged against the Separate Account without
regard to our other income, gains, or losses. Our obligations arising under the
Contracts are general corporate obligations of Lincoln Benefit.
The Separate Account is divided into Subaccounts. The assets of each
Subaccount are invested in the shares of one of the Portfolios. We do not
guarantee the investment performance of the Separate Account, its Subaccounts or
the Portfolios. Values allocated to the Separate Account and the amount of
Variable Annuity payments will rise and fall with the values of shares of the
Portfolios and are also reduced by Contract charges. We may also use the
Separate Account to fund our other annuity contracts. We will account separately
for each type of annuity contract funded by the Separate Account.
We have included additional information about the Separate Account in
the Statement of Additional Information. You may obtain a copy of the Statement
of Additional Information by writing to us or calling us at 1-800-865-5237. We
have reproduced the Table of Contents of the Statement of Additional Information
on page [ ].
State Regulation of Lincoln Benefit. We are subject to the laws of Nebraska and
regulated by the Nebraska Department of Insurance. Every year we file an annual
statement with the Department of Insurance covering our operations for the
previous year and our financial condition as of the end of the year. We are
inspected periodically by the Department of Insurance to verify our contract
liabilities and reserves. We also are examined periodically by the NAIC. Our
books and records are subject to review by the Department of Insurance at all
times. We are also subject to regulation under the insurance laws of every
jurisdiction in which we operate.
Financial Statements. The financial statements of Lincoln Benefit Life Company
and the Separate Account are set forth in the Statement of Additional
Information.
ADMINISTRATION
We have primary responsibility for all administration of the Contracts and the
Separate Account. Our mailing address is P.O. Box 82532, Lincoln, Nebraska
68501-2532.
We provide the following administrative services, among others:
issuance of the Contracts; maintenance of Contract Owner records; Contract Owner
services; calculation of unit values; maintenance of the Separate Account; and
preparation of Contract Owner reports.
We will send you Contract statements and transaction confirmations at
least quarterly. You should notify us promptly in writing of any address change.
You should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we will
make the adjustment as of the date that we receive notice of the potential
error.
We will also provide you with additional periodic and other reports,
information and prospectuses as may be required by federal securities laws.
MARKET TIMING AND ASSET ALLOCATION SERVICES
Certain third parties offer market timing and asset allocation services in
connection with the Contracts. In certain situations, we will honor transfer
instructions from third party market timing and asset allocation services if
they comply with our administrative systems, rules and procedures, which we may
modify at any time. If allowed in your state, at our discretion, we may limit or
refuse transfers due to excessive trading. See Excessive Trading Limits on page
[ ]. PLEASE NOTE that fees and charges assessed for third party market timing
and asset allocation services are separate and distinct from the Contract fees
and charges set forth herein. We neither recommend nor discourage the use of
market timing and asset allocation services.
DISTRIBUTION OF CONTRACTS
The Contracts described in this prospectus are sold by registered
representatives of broker-dealers who are our licensed insurance agents, either
individually or through an incorporated insurance agency. Commissions paid to
broker-dealers may vary, but we estimate that the total commissions paid on all
Contract sales will not exceed one percent of initial Purchase Payments and one
percent of account value annually beginning in the second Contract year. From
time to time, we may offer additional sales incentives of up to 1% of Purchase
Payments to broker-dealers who maintain certain sales volume levels. We may use
any of our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or from any other charge or fee under the
Contracts, to cover sales commissions and other promotional or distribution
expenses relating to the sale of the Contracts. We do not pay commission on
Contract sales to our employees, employees of Surety Life Insurance Company and
Allstate Financial Services, L.L.C. or their spouses or minor children if these
individuals reside in the State of Nebraska.
ALFS, Inc. ("ALFS") located at 3100 Sanders Road, Northbrook, IL
60062-7154 serves as distributor of the Contracts. ALFS, an affiliate of Lincoln
Benefit, is a wholly owned subsidiary of Allstate Life Insurance Company. ALFS
is a registered broker dealer under the Securities and Exchange Act of 1934, as
amended, and is a member of the National Association of Securities Dealers, Inc.
Lincoln Benefit does not pay ALFS a commission for distribution of the
Contracts. The underwriting agreement with ALFS provides that we will reimburse
ALFS for expenses incurred in distributing the Contracts, including liability
arising out of services we provide on the Contracts.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate Account. Lincoln
Benefit and its subsidiaries are engaged in routine lawsuits which, in our
management's judgment, are not of material importance to their respective total
assets or material with respect to the Separate Account.
LEGAL MATTERS
All matters of Nebraska law pertaining to the Contract, including the validity
of the Contract and our right to issue the Contract under Nebraska law, have
been passed upon by William F. Emmons, Vice President, Assistant General
Counsel, and Assistant Secretary of Lincoln Benefit. Legal matters relating to
the federal securities laws in connection with the Contracts described in this
prospectus are being passed upon by the law firm of Jorden Burt LLP, 1025 Thomas
Jefferson St., East Lobby-Suite 400, Washington, D.C. 20007-0805.
ANNUAL REPORTS AND OTHER DOCUMENTS
Lincoln Benefit's annual report on Form 10-K for the year ended December 31,
2001 is incorporated herein by reference, which means that it is legally a part
of this prospectus.
After the date of this prospectus and before we terminate the offering
of securities under this prospectus, all documents or reports we file with the
SEC under the Exchange Act of 1934 are also incorporated herein by reference,
which means that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with
the SEC and that legally become a part of this prospectus, may change or
supersede statements in other documents that are legally part of this
prospectus.
We file our Exchange Act documents and reports, including our annual
and quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's
"EDGAR" system using the identifying number CIK No. 0000910739. The SEC
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
The address of the site is http://www.sec.gov. You also can view these materials
at the SEC's Public Reference Room at 450 Fifth Street N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free
copy of any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at Lincoln Benefit Life Company, 2940 South 84th Street,
Lincoln, Nebraska 68506 or 1-800-865-5237.
REGISTRATION STATEMENT
We have filed a registration statement with the SEC, under the Securities Act of
1933 as amended, with respect to the Contracts offered by this prospectus. This
prospectus does not contain all the information set forth in the registration
statement and the exhibits filed as part of the registration statement. You
should refer to the registration statement and the exhibits for further
information concerning the Separate Account, Lincoln Benefit, and the Contracts.
The descriptions in this prospectus of the Contracts and other legal instruments
are summaries. You should refer to those instruments as filed for the precise
terms of those instruments. You may inspect and obtain copies of the
registration statements as described on the cover page of this prospectus.
EXPERTS
The financial statements of Lincoln Benefit as of December 31, 2001 and
2000 and for each of the three years in the period ended December 31, 2001 and
the related financial statement schedule incorporated herein by reference from
the Annual Report on Form 10-K of Lincoln Benefit and the Statement of
Additional Information have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of the Separate Account as of December 31, 2001 and for
each of the periods in the two years then ended incorporated herein by reference
from the Statement of Additional Information, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report incorporated herein
by reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
APPENDIX A
Accumulation Unit Values
Basic Policy
Accumulation Unit Accumulation Unit Number of Units
Value(1) Beginning Value Ending Outstanding at End of
Fund(2) Year Year
Alger American Growth 13.21 11.49 135,837 2001
15.72 13.21 154,964 2000
11.92 15.72 110,327 1999
10 11.92 14,614 1998
Alger American Income and Growth............................. 15.71 13.27 145,823 2001
16.14 15.71 134,479 2000
11.49 16.14 61,815 1999
10 11.49 21,210 1998
Alger American Leveraged AllCap.............................. 16.66 13.81 121,008 2001
22.48 16.66 151,988 2000
12.80 22.48 80,962 1999
10 12.80 7,257 1998
Alger American MidCap Growth................................. 16.22 14.95 143,773 2001
15.07 16.22 148,029 2000
11.59 15.07 40,066 1999
10 11.59 3,707 1998
Alger American Small Capitalization.......................... 11.48 7.98 69,327 2001
15.99 11.48 55,329 2000
11.31 15.99 19,202 1999
10 11.31 5,492 1998
Federated High Income Bond II................................ 8.91 8.90 97,931 2001
9.93 8.91 69,061 2000
9.84 9.93 39,637 1999
10 9.84 6,794 1998
Federated U.S. Gov't Securities II........................... 11.01 11.62 249,062 2001
10.06 11.01 166,600 2000
10.26 10.06 92,305 1999
10 10.26 13,480 1998
Federated Utility II......................................... 10.02 8.52 141,337 2001
11.16 10.02 123,235 2000
11.13 11.16 69,241 1999
10 11.13 18,262 1998
Fidelity Asset Manager....................................... 11.21 10.60 78,645 2001
11.83 11.21 70,315 2000
10.80 11.83 16,640 1999
10 10.80 2,962 1998
Fidelity Contrafund.......................................... 12.92 11.18 297,028 2001
14.03 12.92 260,250 2000
11.45 14.03 114,581 1999
10 11.45 9,371 1998
Fidelity Equity-Income....................................... 12.14 11.37 254,071 2001
11.35 12.14 208,086 2000
10.83 11.35 136,950 1999
10 10.83 36,057 1998
Fidelity Growth.............................................. 13.82 11.22 244,606 2001
15.75 13.82 212,291 2000
11.62 15.75 105,637 1999
10 11.62 8,616 1998
Fidelity Index 5000.......................................... 12.07 10.46 532,172 2001
13.49 12.07 478,029 2000
11.36 13.49 264,642 1999
10 11.36 33,281 1998
Fidelity Money Market........................................ 11.03 11.33 2,471,302 2001
10.52 11.03 1,573,179 2000
10.14 10.52 309,000 1999
10 10.14 50,763 1998
Fidelity Overseas............................................ 11.77 9.15 236,023 2001
14.76 11.77 27,747 2000
10.49 14.76 68,426 1999
10 10.49 1,800 1998
Janus Aspen Aggressive Growth................................ 18.33 10.94 272,416 2001
27.26 18.33 293,510 2000
12.26 27.26 121,552 1999
10 12.26 1,708 1998
Janus Aspen Balanced......................................... 14.07 13.22 422,582 2001
14.60 14.07 382,038 2000
11.68 14.60 210,584 1999
10 11.68 20,840 1998
Janus Aspen Flexible Income.................................. 10.76 11.43 90,759 2001
10.27 10.76 75,770 2000
10.25 10.27 51,252 1999
10 10.25 20,382 1998
Janus Aspen Growth........................................... 14.18 10.52 500,279 2001
16.83 14.18 501,738 2000
11.85 16.83 230,318 1999
10 11.85 14,330 1998
Janus Aspen Worldwide Growth................................. 14.40 11.01 394,921 2001
17.32 14.40 453,567 2000
10.68 17.32 236,941 1999
10 10.68 37,205 1998
MFS Emerging Growth.......................................... 16.22 10.64 70,405 2001
20.46 16.22 45,520 2000
11.74 20.46 12,996 1999
10 11.74 2,345 1998
MFS Investors Trust.......................................... 11.59 9.61 44,424 2001
11.77 11.59 45,507 2000
11.19 11.77 33,404 1999
10 11.19 6,884 1998
MFS New Discovery............................................ 18.75 17.56 66,464 2001
19.40 18.75 83,327 2000
11.35 19.40 27,273 1999
10 11.35 3,242 1998
MFS Research................................................. 12.71 9.87 40,314 2001
13.54 12.71 42,165 2000
11.07 13.54 17,884 1999
10 11.07 0 1998
MFS Total Return............................................. 12.33 12.19 69,793 2001
10.78 12.33 28,707 2000
10.60 10.78 25,481 1999
10 10.60 4,529 1998
Scudder Balanced............................................. 12.12 11.23 80,281 2001
12.55 12.12 41,881 2000
11.03 12.55 38,133 1999
10 11.03 3,482 1998
Scudder Bond................................................. 10.84 11.31 167,519 2001
9.95 10.84 91,604 2000
10.18 9.95 18,799 1999
10 10.18 1,861 1998
Scudder Global Discovery..................................... 16.45 12.23 62,136 2001
17.61 16.45 104,821 2000
10.76 17.61 16,668 1999
10 10.76 313 1998
Scudder Growth and Income.................................... 10.62 9.29 23,349 2001
11.00 10.62 22,884 2000
10.52 11.00 11,386 1999
10 10.52 7,306 1998
Scudder International........................................ 12.21 8.32 232,375 2001
15.81 12.21 146,023 2000
10.38 15.81 11,257 1999
10 10.38 1,422 1998
STI Capital Appreciation..................................... 10.23 9.55 6,412 2001
10.07 10.23 4,646 2000
10 10.07 7,015 1999
STI International Equity..................................... 10.00 8.14 27,581 2001
10.50 10.00 498 2000
10 10.50 0 1999
STI Value Income Stock....................................... 9.40 9.16 51,116 2001
8.63 9.40 1,202 2000
10 8.63 1,202 1999
Strong MidCap Growth II...................................... 17.94 12.24 55,024 2001
21.36 17.94 85,612 2000
11.41 21.36 41,884 1999
10 11.41 0 1998
Strong Opportunity II........................................ 15.28 14.51 73,617 2001
14.54 15.28 39,791 2000
10.93 14.54 8,063 1999
10 10.93 551 1998
T. Rowe Price Equity Income.................................. 12.29 12.29 116,370 2001
11.02 12.29 48,566 2000
10.78 11.02 33,427 1999
10 10.78 6,696 1998
T. Rowe Price International Stock............................ 11.47 8.80 336,806 2001
14.16 11.47 86,395 2000
10.77 14.16 14,390 1999
10 10.77 2,055 1998
T. Rowe Price Mid-Cap Growth................................. 14.86 14.51 53,877 2001
14.03 14.86 68,062 2000
11.50 14.03 16,853 1999
10 11.50 5,872 1998
T. Rowe Price New America Growth............................. 11.02 9.57 9,800 2001
12.50 11.02 10,615 2000
11.24 12.50 13,132 1999
10 11.24 1,518 1998
- -----------
(1) Accumulation Unit Value: unit of measure used to calculate the
value of a Contract Owner's interest in a Subaccount for any
Valuation Period. An Accumulation Unit Value does not reflect
deduction of certain charges under the Contract that are
deducted from your Contract Value, such as the Contract
Administration Charge, and Administrative Expense Charge. The
beginning value for 1998 reflects the Accumulation Unit Value
as of August 17, 1998, the effective date of the Registration
Statement for this Contract.
(2) STI Classic Variable Trust Subaccounts were not available
during 1998.
A brief explanation of how performance of the Subaccounts is calculated may be
found in the Statement of Additional Information.
APPENDIX B
PORTFOLIOS AND PERFORMANCE DATA
PERFORMANCE DATA
From time to time the Separate Account may advertise the Fidelity Money
Market Subaccount's "yield" and "effective yield." Both yield figures are based
on historical earnings and are not intended to indicate future performance. The
"yield" of the Fidelity Money Market Subaccount refers to the net income earned
by the Subaccount over the seven-day period stated in the advertisement. This
income is then "annualized." That is, the amount of income earned during that
week is assumed to be generated each week over a 52-week period and is shown as
a percentage of the investment. The "effective yield" is calculated similarly
but, when annualized, the income earned by the investment is assumed to be
reinvested at the end of each seven-day period. The "effective yield" will be
slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. Neither the yield nor the effective yield takes into
consideration the effect of any capital gains or losses that might have occurred
during the seven day period, nor do they reflect the impact of any premium tax
charge. The impact of other, recurring charges on both yield figures is,
however, reflected in them to the same extent it would affect the yield (or
effective yield) for a Contract of average size.
In addition, the Separate Account may advertise an annualized 30-day
(or one month) yield figure for Subaccounts other than the Fidelity Money Market
Subaccount. These yield figures are based upon the actual performance of the
Subaccount over a 30-day (or one month) period ending on a date specified in the
advertisement. Like the money market yield data described above, the 30-day (or
one month) yield data will reflect the effect of all recurring Contract charges,
but will not reflect any premium tax charge. The yield figure is derived from
net investment gain (or loss) over the period expressed as a fraction of the
investment's value at the end of the period.
The Separate Account may also advertise standardized and
non-standardized "total return" data for its Subaccounts. Like the yield figures
described above, total return figures are based on historical data and are not
intended to indicate future performance. The standardized "total return"
compares the value of a hypothetical investment made at the beginning of the
period to the value of the same hypothetical investment at the end of the
period. Recurring Contract charges are reflected in the standardized total
return figures in the same manner as they are reflected in the yield data for
Contracts funded through the Money Market Subaccount.
In addition to the standardized "total return," the Separate Account
may advertise non-standardized "total return." Non-standardized total return is
calculated in a similar manner and for the same time periods as the standardized
total return. We assumed, however, an initial hypothetical investment of
$75,000, because $75,000 is closer to the average Purchase Payment of a Contract
which we expect to write. Standardized total return, on the other hand, assumes
an initial hypothetical investment of $1,000. In addition, non-standardized
total return does not reflect the effect of the contract maintenance charge,
because we waive that charge on Contracts on which the Purchase Payments exceed
$50,000. As a result, the return on a Contract that is subject to the contract
maintenance charge will be less than the non-standardized total return
calculated as described above.
The Separate Account may also disclose yield and non-standardized total
return for time periods before the date the Separate Account commenced
operations. In this case, performance data for the Subaccounts is calculated
based on the performance of the Portfolios and assumes that the Subaccounts
existed during the same time period as those of the Portfolios, with recurring
Contract charges equal to those currently assessed against the Subaccounts.
Our advertisements may also compare the performance of our Subaccounts
with: (a) certain unmanaged market indices, including but the Dow Jones
Industrial Average, the Standard & Poor's 500, and the Shearson Lehman Bond
Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. Our advertisements
also may include the performance ranking assigned by various publications,
including the Wall Street Journal, Forbes, Fortune, Money, Barron's, Business
Week, USA Today, and statistical services, including Lipper Analytical Services
Mutual Fund Survey, Lipper Annuity and Closed End Survey, the Variable Annuity
Research Data Survey, and SEI.
The Contract charges are described in more detail on page [ ]. We have
described the computation of advertised performance data for the Separate
Account in more detail on page [ ] of the Statement of Additional Information.
APPENDIX C
ILLUSTRATION OF A MARKET VALUE ADJUSTMENT
Purchase Payment: $ 40,000.00
Guarantee Period: 5 Years
Guaranteed Interest Rate: 5% Annual Effective Rate
5-year Treasury Rate at
Time of Purchase Payment: 6.0%
The following examples illustrate how the Market Value Adjustment may
affect the values of a Contract upon a withdrawal. The 5% assumed Guaranteed
Interest Rate is the rate required to be used in the "Summary of Expenses." In
these examples, the withdrawal occurs one year after the Issue Date. The Market
Value Adjustment operates in a similar manner for transfers.
Assuming that the entire $40,000.00 Purchase Payment is allocated to
the Guaranteed Maturity Fixed Account for the Guarantee Period specified above,
at the end of the five-year Guarantee Period the Contract Value would be
$51,051.26. After one year, when the withdrawals occur in these examples, the
Contract Value would be $42,000.00. We have assumed that no prior partial
withdrawals or transfers have occurred.
The formula that we use to determine the amount of the Market Value
Adjustment is:
.9 x (I - J) x N,
where: I = the Treasury Rate for a maturity equal to the relevant
Guarantee Period for the week preceding the beginning of the Guarantee Period;
J = the Treasury Rate for a maturity equal to the relevant
Guarantee Period for the week preceding our receipt of your withdrawal request,
death benefit request, transfer request, or annuity option request; and
N = the number of whole and partial years from the date we
receive your request until the end of the relevant Guarantee Period.
We will base the Market Value Adjustment on the then current Treasury
Rate for a maturity corresponding in length to the relevant Guarantee Period.
Example of a Downward Market Value Adjustment
A downward Market Value Adjustment results from a full or partial withdrawal
that occurs when interest rates have increased. Assume interest rates have
increased one year after the Purchase Payment, such that the five-year Treasury
Rate is now 6.5%. Upon a withdrawal, the market value adjustment factor would
be:
.9 x (.06 - .065) x 4 = -.0180
The Market Value Adjustment is a reduction of $756.00 from the amount
withdrawn:
- $756.00 = -.0180 x $42,000.00
As a result, the net amount payable to you would be:
$41,244.00 = $42,000.00 - $756.00
Example of an Upward Market Value Adjustment
An upward Market Value Adjustment results from a withdrawal that occurs when
interest rates have decreased. Assume interest rates have decreased one year
after the Purchase Payment, such that the five-year Treasury Rate is now 5.5%.
Upon a withdrawal, the market value adjustment factor would be:
.9 x (.06 - .055) x 4 = .0180(1)
The Market Value Adjustment would increase the amount withdrawn by
$756.00, as follows:
$756.00 = .0180 x $42,000.00
As a result, the net amount payable to you would be:
$42,756.00 = $42,000.00 + $756.00
- -----------
(1) Actual calculation utilizes ten decimal places.
Example of a Partial Withdrawal
If you request a partial withdrawal from a Guarantee Period, we can either (1)
withdraw the specified amount of Contract Value and pay you that amount as
adjusted by any applicable Market Value Adjustment or (2) pay you the amount
requested, and subtract an amount from your Contract Value that equals the
requested amount after application of the Market Value Adjustment. Unless you
instruct us otherwise, when you request a partial withdrawal we will assume that
you wish to receive the amount requested. We will make the necessary
calculations and on your request provide you with a statement showing our
calculations.
For example, if in the first example above you wished to receive
$20,000 as a partial withdrawal, we would perform the following calculations:
let A = the amount to be withdrawn from your Contract Value;
and
B = the amount of the applicable Market Value Adjustment
Then A + B = $20,000,
-.0180 x A = B, and
A = $20,000/(1-.0180) = $20,366.60
Accordingly, we would pay you $20,000 and subtract $20,366.60 from your
Contract Value. The Market Value Adjustment would be a subtraction of $366.60.
If, however, in the same example, you wished to withdraw $20,000 from
your Contract Value and receive the adjusted amount, we would perform the
following calculations:
let A = the amount to be paid to you; and
B = the amount of the applicable Market Value Adjustment
Then $20,000 + B = A, -.0180 x $20,000 = -$360.00 = B, and A =
$20,000 - $360.00 = $19,640.00
Accordingly, we would pay you $19,640.00 and subtract $20,000.00 from
your Contract Value. The Market Value Adjustment would be a subtraction of
$360.00
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Pursuant to Item 511 of Regulation S-K, the Registrant hereby represents
that the following expenses totaling approximately $31,000.00 will be incurred
or are anticipated to be incurred in connection with the issuance and
distribution of the securities to be registered: registration fees - $0; cost of
printing and engraving - $25,000.00 (approximate); legal fees - $5,000.00
(approximate), and accounting fees - $1,000.00 (approximate). All amounts are
estimated for the period ending May 1, 2002 for the continuos offering of
shares, but are not deducted from proceeds.
Item 15. Indemnification of Directors and Officers
The Articles of Incorporation of Lincoln Benefit Life Company (Depositor)
provide for the indemnification of its directors and officers against expenses,
judgments, fines and amounts paid in settlement as incurred by such person, so
long as such person shall not have been adjudged to be liable for negligence or
misconduct in the performance of a duty to the Company. This right of indemnity
is not exclusive of other rights to which a director or officer may otherwise be
entitled.
The By-Laws of ALFS, Inc. (Distributor) provide that the corporation will
indemnify a director, officer, employee or agent of the corporation to the full
extent of Delaware law. In general, Delaware law provides that a corporation may
indemnify a director, officer, employee or agent against expenses, judgments,
fines and amounts paid in settlement if that individual acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
No indemnification shall be made for expenses, including attorney's fees, if the
person shall have been judged to be liable to the corporation unless a court
determines such person is entitled to such indemnity. Expenses incurred by such
individual in defending any action or proceeding may be advanced by the
corporation so long as the individual agrees to repay the corporation if it is
later determined that he or she is not entitled to such indemnification.
Under the terms of the form of Underwriting Agreement, the Depositor
agrees to indemnify the Distributor for any liability that the latter may incur
to a Contract owner or party-in-interest under a Contract, (a) arising out of
any act or omission in the course of or in connection with rendering services
under such Agreement, or (b) arising out of the purchase, retention or surrender
of a Contract; provided that the Depositor will not indemnify the Distributor
for any such liability that results from the latter's willful misfeasance, bad
faith or grow negligence, or from the reckless disregard by the latter of its
duties and obligations under the Underwriting Agreement.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the forgoing provisions, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suite or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 16. Exhibits
Exh. No. Description
1 Form of Principal Underwriting Agreement*
3(a) Articles of Incorporation**
3(b) Bylaws**
4(a) Form of Variable Annuity Contract***
4(b) Form of Application***
5 Opinion and Consent of Counsel regarding legality*****
21 Subsidiaries of Registrant - Not Applicable
23(a) Consent of Deloitte & Touche LLP, Independent Auditors
23(b) Consent of Attorneys
27 Financial Data Schedule****
- -------------------------------------------------
* Incorporated herein by reference to Post-Effective Amendment No. 1 to
the Registration Statement on Form N-4 for Lincoln Benefit Life
Variable Annuity Account (File No. 333-50545, 811-07924) filed January
28, 1999
** Incorporated herein by reference to the Registration Statement on Form
S-6 for the Lincoln Benefit Life Variable Life Account (File No.
333-47717) filed March 11, 1998
*** Incorporated herein by reference to the Registration Statement on Form
N-4 for Lincoln Benefit Life Variable Annuity Account (File No.
333-50737, 811-07924) filed April 22, 1998
**** Incorporated herein by reference to the Registrant's Form 10-K filed
March 29, 2002.
***** Incorporated herein by reference to Post-Effective Amendment No. 2 to
S-1 on Form S-3 for the Lincoln Benefit Life Variable Annuity Account
(File No. 333-59769) filed March 30, 2000.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the determining of any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liabilities under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted in directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
SIGNATURES
As required by the Securities Act of 1933, the Registrant has reasonable
grounds to believe that it meets all of the requirements for filing on Form S-3
and has duly caused this amended Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Lincoln and
State of Nebraska on the 29th day of April 2002.
LINCOLN BENEFIT LIFE COMPANY (Registrant)
By: /s/ B. Eugene Wraith
-------------------------------------------
B. Eugene Wraith
President and Chief Operating Officer
Pursuant to the Securities Act of 1933, this Post-Effective Amendment to
the Registration Statement has been signed below by the following directors and
principal officers of Lincoln Benefit Life Company in the capacities indicated
on the 29th day of April 2002.
Name Title Date
/s/ B. Eugene Wraith
- ------------------------------- Director, President and Chief Operating Officer April 29, 2002
B. Eugene Wraith
(Principal Executive Officer)
/s/ Samuel H. Pilch
- ------------------------------ Group Vice President and Controller April 29, 2002
Samuel H. Pilch
(Principal Accounting Officer)
/s/ James P. Zils
- ----------------------------- Treasurer April 29, 2002
James P. Zils
(Principal Financial Officer)
/s/ Lawrence W. Dahl
- ---------------------------- Director, Executive Vice President April 29, 2002
Lawrence W. Dahl
/s/ Margaret G. Dyer
- ---------------------------- Director April 29, 2002
Margaret G. Dyer
/s/ Marla G. Friedman
- ---------------------------- Director April 29, 2002
Marla G. Friedman
/s/ Douglas F. Gaer
- ---------------------------- Director, Executive Vice President April 29, 2002
Douglas F. Gaer
/s/ John C. Lounds
- ---------------------------- Director April 29, 2002
John C. Lounds
/s/ J. Kevin McCarthy
- ---------------------------- Director April 29, 2002
J. Kevin McCarthy
/s/ Steven E. Shebik
- ---------------------------- Director April 29, 2002
Steven E. Shebik
/s/ Michael J. Velotta
- ---------------------------- Director, Senior Vice President,
Michael J. Velotta General Counsel and Secretary April 29, 2002
/s/ Thomas J. Wilson, II
- ---------------------------- Director, Chairman of the Board and
Thomas J. Wilson, II Chief Executive Officer April 29, 2002
EXHIBITS
Exhibit No. Description
23(a) Consent of Independent Auditors
23(b) Consent of Attorneys